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When Steve Schuck took charge of then-sprawling Colorado
Corp. back in 1987, the prospects were anything but bright
for the new leader, who immediately changed his title from
Governor
to Chief Executive Officer
in line
with his pledge to run Colorado like a business.
For more than a century, Colorado had been run like a government, not a business. Such mismanagement showed. The organization had been trying to serve its customers, not its stockholders. Instead of maximizing income in a monopoly situation, the old management had actually reduced its revenue share. Capital investment lagged far behind corporate requirements. The organizational matrix was convoluted: the executive was a mere figurehead, with real power lying in a fragmented 100-person board of directors.
Schuck had to perform quickly as Chapter 11 loomed. Investors and lenders were losing confidence in Colorado Corp. -- the company had long ago squandered a major asset, clean air, and was inexplicably selling off another, scenery, at prices far below replacement costs.
As CEO, Schuck's first countermove was to reverse Colorado's anemic cashflow by spinning off several diverse divisions which had been difficult to manage from the gold-domed headquarters in Denver.
Most of Colorado's Western Rimrock subsidiary went to Utah, with Wyoming, on an expansion binge then, picking up remote Moffat, Routt and Jackson counties. At the foreclosure auction of Colorado's depressed agricultural sectors in 1988, Nebraska bought the Lower Platte, and Kansas the Lower Arkansas.
In a brilliant strategic ploy, Schuck sold only the land, leasing the water rights but retaining title. Wall Street analysts believe the water will eventually be sold to the huge Arizona-California Trust when the price is right. However, AzCal has been taking a strong position in Colorado Corp. stock, which may portend this worst-case scenario: a hostile takeover with AzCal gaining water assets by looting Colorado Corp.
Schuck has forestalled any such takeover by divesting the long-unprofitable San Luis Division. Colorado had been spending a great deal more to operate this division than it ever provided in revenues. Even so, the division's corporate culture and real assets made it a natural acquisition for New Mexico under the favorable long-term financing Schuck arranged.
In selling off the San Luis Division, Schuck eliminated a major drag on corporate profits -- thousands of downscale clients. Colorado couldn't get rid of them otherwise, and it couldn't make money off them, yet it had been keeping them as customers. This was obviously no way to run a business.
After scaling back Colorado Corp. to a manageable size with a more upscale clientele, Schuck saw renewed investor confidence. Colorado Corp. stock rose, making it harder for AzCal to continue buying in. CEO Schuck then shifted his focus to marketing and operations.
Colorado Corp.'s major cash cow had been tourism, but the company encountered a positioning problem in expanding further into this mature market: no ocean or beaches. Colorado acquired Cozumel, a popular seaside resort in Mexico, in a tax-free exchange for Telluride, an old mining town turned ski resort, of which Colorado had a surplus.
Education, the major corporate cash drain, was turned around by moving facilities offshore to take advantage of lower wages and costs. The University of Colorado now operates in Singapore, Colorado State in Belize, and Colorado School of Mines in a Chilean open-pit copper mine. Annual professorial salaries have dropped from an average of $37,000 to about $800.
Until last year, Colorado Corp. still suffered massive losses on its highway division. Schuck subcontracted the highways to an experienced transportation operator, the Denver & Rio Grande, which quickly posted a profit by abandoning all local roads and service.
CEO Schuck easily weathered the few complaints. He pointed out that Colorado Corp.'s profit centers lay along the two interstate corridors, and anyone who wanted corporate services could relocate to a town on I-25 or I-70.
As Fiscal Year 1990 draws to a close, quarterly earnings are at record levels. While it is true that Colorado's real-estate holdings have been greatly reduced, most of those holdings represented drains, not profit centers. Cash hemorrhages like education and transportation have been stemmed, and the remaining clientele is upscale and concentrated, thereby reducing administrative and distribution costs.
The outlook is bright for investors, and presumably the
customers are satisfied. They're the ones who wanted Schuck
to run Colorado like a business.
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