Dee grew up in the Winston-Salem area. He graduated from Gray High, then UNC Chapel Hill in 1951. He went to Korea during the Korean War.
Coming to RJR
After military service, Dee returned to work for RJR in 1955.
Memorable Events at RJR
He was an assistant controller by the mid-1960s.
In 1974 with the purchase of McDonald Tobacco, he was sent to Montreal to run the operation. And his first three years profits went from flat to $1.5 million, $5.0 million, $15 million.
When Dee moved to Montreal he faced problems often faced with a new acquisition. The person who sold had not been successful at running the company. He was an heir of the original owner. The seller did not take kindly to Dee. At a meeting when the deal is closed, the seller said, “We are now working for RJR and Dee Smith is in charge. Dee reminds me of my father. And I hated that son-of- a-bitch too.”
Dee had to keep him around for several years, but he terminated 12 of his 14 Vice Presidents in the first year. He also reduced factory headcount from 2,500 to 2,000. This required approval of the government in Ottawa. Dee pointed out that either 500 people could go now or all 2,500 would lose their jobs later when the company was closed.
While Dee was in Canada he was looking for new management at McDonald. An executive recruiting firm that Dee was considering asked Dee to meet with some people they had already placed. They wanted him to see the quality of the people they were placing with clients. One of the people Dee met with in Toronto was Ross Johnson. Ross had just become the CEO of Standard Brands Canada. Dee was not favorably impressed with Ross. Ross entered the room smoking a big cigar and had lots to drink at lunch. Dee saw him as something of a “hot shot.“ Ross even laid out his plan to become the CEO of Standard Brands U.S. within two years. This was a strategy that he was to use at both Standard Brands and Nabisco before merging with RJR. I asked Dee if he had shared that lunch meeting with anyone, and Dee said he had never been asked.[i]
He returned to Winston-Salem and the newly formed RJR Tobacco International as president and COO. Ty Wilson was CEO.
Dee credited Ed Horrigan with considerable street smarts. He said that once they were attempting to hire a top level staff person for a highly visible position. The person had been cleared by several members of management. When Ed interviewed the man, he observed that he was pretty sure the man was a transvestite. He had had observed the way he scratched his ear, crossed his legs, and wore a high neck blouse to cover his Adams apple. Ed’s management style was very different from the old style RJR people.
Today, this personal sexual orientation of a prospective employee would be less of an issue, but thirty years ago this would not have been acceptable to management. It is humorous to think what might have happened if the person had been hired. He certainly would not have fit in well with the traditional tobacco management.
Dee saw resistance among the old guard to innovative ideas as Reynolds was moving into a new era. In the traditional manufacturing operations a plant manager groomed an assistant plant manager for ten years and then that assistant took over when the plant manager retired. This was a rather insular system, and Dee suggested a more innovative approach where personnel were moved from department to department for broadening. The head of manufacturing retired rather than submit to these changes.
In 1980, Dee went back to the domestic tobacco company. He had a mandate to modernize the manufacturing‘s facilities. Inefficiencies were costing a great deal of money – plants were running twenty-six weeks of overtime. They invested $2.5 billion in modernizing Whitaker Park and building Tobaccoville. Production on the new machines went from 4,000 to 8,000 cigarettes per minute, and the new operations reduced employees by half in the production area, raising productivity by 100 percent. This new equipment was needed so badly and was in such short supply that a packer manufacturer in Italy was advanced money by RJR to add capacity so that it could meet RJR’s need. Philip Morris had already tied up all the original capacity of the manufacture as they too needed new packers.
Tobacco blending is very important. There is a parallel between tobacco blends and wine. While the grapes vary in quality every year, an enologist’s challenge is to take those grapes and make the wine taste the same as the year; the customers want consistency of taste. Same is true with tobacco. The leaf varies from year-to-year, but the blend needs to taste the same.
The Sea-Land acquisition was struck between Alec Galloway and Malcolm McLean at a dinner with Malcolm laying out the plan on the back of an envelope. [ii]
Malcolm had some wild ideas. He wanted to buy Brazilian tobacco, place it on ships and have a factory on the ship process the tobacco and place it in hogsheads. When the tobacco arrived at the port in Norfolk, it would be ready for storage. This was a great idea, but like so many of Malcolm’s ideas, it was not feasible.
Dee dealt with a number of delicate international situations such as selling tobacco in 1979 in Tehran at about the time the Shah fell from power. Reynolds never took the time to understand the international business in the early years, while Philip Morris did. Any number of our international competitors came from far better equipped backgrounds than tobacco men from Winston-Salem. Some of them had been engaged in all sorts of international activities like smuggling and gun-running, early skills that stood them in good stead in cutting deals around the world.
There was a great change in management as newer people moved in from the outside. They engaged in practices that cut corners in ways that the original RJR management would not have done. He still saw a lot of money spent on items that reflected a questionable personal lifestyle that was way outside the norms of Winston-Salem. Activities that would clearly be grounds for a lawsuit today.
Dee retired in 1985 and went on to run a savings and loan in Greensboro for five years which he moved from a mutual company to a stock company. He observed that in the finance business there was very little at latitude in pricing and cost cutting – money was borrowed in a certain rate and loaned at a certain rate. He joked that in the tobacco business if the company needed another hundred million dollars it could reduce the circumference of the cigarettes by a few millimeters, or shorten the filter by a few millimeters, or change to a slightly less expensive blend of tobaccos. Yet more proof of the great ability of the tobacco business to manage its business and its cash flow.
As a final act in his long career he worked for the medical community raising funds for what was to become for site for the county’s biggest industry – medicine. It is ironic that much of this new industry was funded with tobacco money. He worked on the Innovation Center that was built from renovated abandoned tobacco facilities.
Dee Smith had a long and great career in both domestic and international tobacco operations. His work for the community did not end with his RJR retirement. He worked diligently as a development officer for the hospitals in the area, and he was instrumental in raising funds for the Innovation Center that has done so much to revive the inner-city of Winston-Salem. GAH
[i] My question still is, “If Dee spotted this in Ross, why couldn’t our board have known more about the background of this man and his operating style?” GAH
[ii] This was not a surprise; I have seen Malcolm lay out plans like this any number of times in the brief while I worked with him. Malcolm was a super salesman and he could spin quite a sales pitch around those numbers sketched at a dinner table. GAH