Hit the Road, Daddy

U-HAUL's founder never imagined his own kids would be the corporate raiders of his great American dream

Actually, L.S. says, he had devised a convoluted plan which he had hoped would lead to reconciliation with Suzanne and peace with Joe and Mark. It failed miserably. "I would never have divorced him, but he left me," Suzanne says. "After all this was done, I felt like one of those guys from Vietnam--that posttraumatic stress syndrome thing."

As far as bitter divorces go, this one was a doozy. Suzanne accused L.S. of hiding assets, but she wound up in 1977 with a piddling amount under the circumstances. (L.S. says Suzanne received about $1 million in the settlement, while Suzanne says it was much less than that. Court records don't show an exact dollar amount.)

Suzanne learned after the divorce was final that another woman had given birth in 1974 to L.S.'s twelfth child, Scott. L.S. married and divorced the other woman in 1978, when the little boy was about four. A subsequent wham-bam marriage to one of his former secretaries also failed.

L.S. became so seriously depressed in 1978 that Doc Sam escorted him to a mental hospital in Los Angeles, where he stayed for about a month. As L.S. recovered, the Shoen brothers tried to run U-Haul. By the time L.S. got back in the saddle months later, they were at each other's throats.

A desperate L.S. searched for ways to mend the widening schism in his family and also to try to piece himself back together. In 1979, he tried his hand at EST, a "self-realization" system developed by a huckster who called himself Werner Erhard. In the new spirit of get-it-all-out-on-the-table, L.S. hired Tucson psychologist Dr. Jerry Day to try to help his family.

Day's report, obtained by New Times, indicates that he tried to work with the Shoens for several months. "If anything," he writes, "the family relationships deteriorated further as the deep anger and hurt were brought into sharper focus."

Day's report concentrates on Joe and Mark, the two sons L.S. saw as his biggest headaches. Day writes of Joe and Mark's "terrible" relationship with Suzanne, recalling that "they were unloved by their stepmother and their father was absent from the home a good deal."

The psychologist sounds an ominous warning about Joe and Mark: "They matured into adults who are quite comfortable with power and are willing to fight for it. Their desire for absolute power is insatiable. The more they have, the more they want."

He offers advice. "As head of U-Haul, L.S. should allow the full consequences of their behavior to befall Mark and Joe," Day writes. "They should not be protected from financial pain or boredom or unfulfillment or vocational limbo. It will be almost impossible to reason with Joe or Mark concerning their stormy relationship with the group."

But L.S. Shoen never was good at taking advice. Joe and Mark quit U-Haul by the end of 1979. L.S., however, kept them each on the company payroll at $86,000 annually for more than two years.

U-HAUL'S RENTAL EMPIRE began to wobble in the early 1980s. The company had, in a word, overexpanded. That was made perfectly clear by the bottom line.

After a record-setting $41.6 million profit in the 1983-84 budget year, U-Haul spiraled downward. The firm's new full-service moving line was losing millions a year. The emphasis on renting out everything--videotape players, champagne fountains, fold-up dance floors--also wasn't panning out.

Things were even slipping in truck- and-trailer rentals, U-Haul's bread and butter. Revenues still were climbing, but overall operating and net incomes had dipped drastically.

By this time, competition was breathing down U-Haul's back. The new kid on the block was called Ryder System, and it was snatching U-Haul's customers by the month. Still, L.S. didn't seem motivated to buy new trucks or even to refurbish the old ones he had.

The willy-nilly diversification finally caught up to U-Haul and its founding father in 1984. In the last months of that year, L.S. had to cut management salaries by 10 percent so U-Haul could keep up with its creditors. He also laid off almost 5,000 workers--many of them seasonal employees who were short-term anyway--and canceled the $200 Christmas bonus. Profits for that year were only $2 million, the lowest in more than a decade.

"We did get out of hand," L.S. admits, "and I said, `Stop, fellas, stop,' and I instituted a consolidation program. I made a slug of mistakes in my life, a slug of them, disastrous things, but I've done a lot of good things, too. By the time Joe took over in '86, we were making it again, and we would have made $100 million this year easy--after taxes. We were ready to reap the benefits of ten years' hard work."

But Joe Shoen wasn't buying his father's song and dance. A few years earlier, a U-Haul employee had warned L.S. that he had seen a startling memo on Joe's desk. It was entitled something like "How to Get Rid of the Founding Father." By 1986, Joe had the right ingredients to do just that.

AFTER QUITTING U-HAUL in 1979, Joe and Mark Shoen still had the luxury of a big salary for a few years. They also had the million or so their dad had given them, at least until Mark lost about $700,000 in a business deal that went south.

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