Hit the Road, Daddy

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

Joe opened a successful paint store in Mesa, and he also started a printing company with Mark called Form Builders.

Form Builders was "wired-in" from the start, that is, it did business almost exclusively with U-Haul without worrying about competition. That saved it thousands each year in marketing and advertising costs. By the mid-1980s, Form Builders was pulling in millions a year.

L.S., however, never really tried to pull the plug on his sons' burgeoning business until after Joe's 1986 coup left him twisting in the wind. Now, the IRS is after Form Builders for nearly a half- million dollars in back taxes. Joe and Mark also are defending themselves and Form Builders in another lawsuit filed by the L.S. Group. The suit accuses the brothers of fraudulent business practices and of overcharging U-Haul.

But even when things were good, Joe wasn't content just to reap profits from a paint store and a printing firm. He also started trying to convince enough brothers and sisters that it was time to put L.S. out to pasture. By the autumn of 1986, Joe had enough votes to make his move.

"I got carried away with the wave," says Mary Anna Eaton. "I thought my dad was overworked and that he would enjoy life more in retirement. It was very arrogant of me, and I'm ashamed. But we did what we did."

Joe came into power at U-Haul with a six-shooter on each hip, hacking away at the status quo in what he calls a back- to-basics campaign. He soon closed the money-losing van lines, started selling off vast chunks of real estate, and severely reduced the number of items that U-Haul was renting out.

He also fired several thousand people, including dozens of top-level managers--many of whom had spent most of their adult lives at U-Haul. Joe knew this would cause problems with many of his brothers and sisters.

"Joe said, `Heads will roll,' and he meant they would come off with a saber," Mary Anna Eaton says. "My dad built his company on respect and trust and loyalty. Joe has no idea what all that means."

In September 1987, U-Haul announced a dividend of $1 per share, the first such payout in its history. Around Christmas that year, the firm issued dividends of $13.50 a share. That meant checks of more than $100,000 each to the largest shareholders--Joe, Mark, Mike, Doc Sam, and Mary Anna.

At the same time, U-Haul again canceled its traditional $200 Christmas bonus. "I won't spend money we don't have on a discretionary bonus," Joe said in a company newsletter. U-Haul employees quietly were outraged after news of the dividend slowly leaked out.

"I was ticked off about no bonus, but I could have tolerated it," says a former U-Haul employee. "I wanted to strangle Joe when I found out the real story, that he was trying to buy off his brothers and sisters."

The shareholder dividends are becoming a regular thing. U-Haul declared a $4.40 per share dividend in July 1988, and a few weeks before its most recent shareholders meeting in Reno, it issued dividends of $24.33 per share. The company still hasn't publicly announced its latest payouts. U-Haul spokesman Chuck Smith says he has no information about the $24.33 dividend, but New Times has spoken to six shareholders who already have cashed their checks.

Joe's opponents agree he was trying to solidify himself at U-Haul by issuing a big dividend. If Joe's motive was to curry favor with his disgruntled siblings, it didn't work.

U-Haul projects record-setting earnings of about $50 million for the 1988-89 budget year. Is Joe doing a better job of running the company than L.S. did?

Press release after press release from U-Haul credits Joe's "back to basics" plan--a sort of dance-with-the-girl- that-brung-ya approach that concentrates on the time-honored truck-and-trailer rentals. The L.S. Group contend, however, that those "profits" have come largely from U-Haul selling off huge chunks of real estate and from borrowing money to finance its operations.

Despite the dividend payouts and the leap in U-Haul's bottom line, Joe found himself in a curious pickle last summer. More and more of the Shoen children had decided to align with Dad. And simple mathematics showed the L.S. Group now controlled more stock than Joe and company.

The swing stock of about 5 percent had been held by Katrina, the youngest daughter in the House of Shoen. Joe had been wooing Katrina since her 21st birthday and even flew to her graduation in May 1988 at Brown University in Providence, Rhode Island. (L.S. and the others declined to attend the ceremony after they heard Joe was going to be there.)

Katrina says she wants to believe Joe went to her graduation without an ulterior motive. But she's not sure. "This goes for either side of my family," she says. "You don't know whether they're doing something because they love you and they want you to be happy and do something for you, or because they want your vote and want you to be on their side. You never can be 100 percent sure. Never."

When Katrina decided to join forces with her father's group, Joe was in big trouble.

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