The NCR 605 Minicomputer
at the DaytonRotary Club
October 2, 2006
William and Janice Anderson
I am happy to be back here in Dayton at my home club. Dayton was my home for 23 years, which is longer than any other place where I have lived. Thank you for making me an honorary member of your club, which enables me to have had continuous membership in Rotary for 57 years.
I think this is the third time I have addressed our club so those of -you who are old-timers in Dayton will know my background at NCR, but for the benefit of newer members, let me give you a brief outline of my early days in China, my experience as a POW of the Japanese and my NCR .experience in Asia and finally here in Dayton.
I was born in Central China and went to school in Wuhan and Shanghai. Just as I was about to receive my matriculation from high school, the Sino-Japanese war broke out in Shanghai. I was on holiday and could not return, as the school was closed. After Japan took Shanghai they advanced up the Yangtse River and invaded Nanjing which was then the capital of China. Some of you may have heard of the Rape of Nanjing where over 300,000 Chinese civilians were executed. Then they proceeded up river to take Wuhan. The 'international community was advised to leave and organized a special train to travel on the newly opened Wuhan Canton Hong Kong railway. Because of all the fighting along the way, we had to get clearance not only from the Japanese but from the Chinese Nationalist Army, as well as the Communist Chinese Army to allow the train to go through.
My mother and I lost our home and decided to make Hong Kong our new home. As my mother was a widow and had limited capital, I refused to go to university in Scotland, but instead took a job as internal auditor at the Peninsula Hotel Group while studying accountancy in the evenings. Two years later, when I got the British equivalent of the CPA, I joined an auditing firm.
On December 8, 1941, which was December 7 in the United States, Pearl Harbor and Hong Kong were attacked -by the Japanese. Since 1939, all British men had to join the Hong Kong Volunteer Defense Corps, similar to your National Guard. We had training one evening a week and two weeks every summer. So, I put on my uniform and joined about 1,500 other volunteers and 9,500 regular troops to fight the invading force of 30,000 Japanese with 30,000 in reserve. The war lasted 17 days and the fighting was very bitter. Most people in this 'country did not even know about it because everyone here was so shook up by Pearl Harbor. Casualties on both sides were very heavy, with the Japanese having 15,000 casualties and the British 4,000 casualties, a very high ratio you will agree.
Naturally the Japanese were not very happy, as they thought they could just take the colony in a couple of days in their first land battle against Britain. Because of this they took no prisoners during the fighting and many of my friends were executed when captured. The Japanese also committed other atrocities such as killing wounded soldiers in hospitals and raping and killing British nurses.
So, on Christmas Day 1945, exactly four years after I had escaped from the Japanese in China, I became a POW and lost my second home. For the first two years, we were in a prison camp in Hong Kong. We were not mistreated physically but suffered terribly from starvation and lack, of medical supplies. About 10 percent of our camp died of malnutrition, dysentery, and other problems.
Almost exactly two years later, the Japanese decided to move 400 POWs to Japan. Two other groups had been sent before us, the first being on a Japanese ship called the Lisbon Maru which was torpedoed outside Shanghai by a U.S. submarine. Half the POWs died because they were locked in the hold and those who managed to escape were machine gunned in the water by the Japanese.
Fortunately our ship was not torpedoed and we were sent to a camp in Nagoya, the third largest city in Japan, to work in a railway locomotive factory. Here the work was very hard. We worked as slave laborers doing manual work with very poor food of about 1,000 calories a day, with little or no fat or protein. We were also beaten occasionally. We had to work 13 days before we had a day off to wash our clothing, cut our hair, etc.
Towards the end of 1944, Japan-was being bombed regularly but usually by relatively small number of planes. In May, 1945 a large air raid over Nagoya - knocked out factory - and we literally had to run for the hills to our camp. As we could not go back to work in Nagoya, we were sent across the country to Toyama on the west coast to work at a branch of the locomotive factory. Toyama was almost totally destroyed in a fire bomb raid on August 1, 1945 and once again we had to run from camp because the heat of the fires was so fierce. However, the camp survived but we no longer had to go to work.
On August 15, 1945 we were told to stay in our barracks and close all shutters so we could not see outside. We peeked and saw the Camp Commandant and all the guards dressed in their best uniforms with white gloves standing to attention listening to a radio broadcast. This was the emperor telling the country to surrender. Days went by and we were still not told, so one day we sent representatives to the Commandant who confessed that he had not told us because he had not received orders. When we told him we were concerned for our safety from local citizens and we wanted to guard ourselves, he had no objections so we went to all the guards and took their guns and guarded the camp ourselves.
As a matter of fact, we had nothing to fear from the civilians who were so glad the war had ended that they came bringing gifts. These were the same people who worked in our factory making on the side, knives, swords, hatchets and spears with any metal they could find. When asked, they told us these were to kill us if Japan was invaded and then they would use these crude weapons to defend the country. Needless to say, the entire country was prepared to do this so you can imagine how many millions of Japanese and thousands of Americans would have been killed if there was an invasion. Fortunately, the two atomic bombs saved them and us. We were evacuated from Japan to the Philippines and the British were sent back to England via Canada. During our two weeks in Canada, we were fattened up so that we would not be too much of a shock to the people back in England when we returned.
Of course I now had to think of making a living again. I was offered a job back at my old firm with the opportunity of becoming partner but my best friend and fellow campmate and former Rotarian of this club, George Haynes, who many of you remember, persuaded me to join NCR saying that my income would be commensurate with my ability and that I could go as high as I wanted. After four years of no income, I decided to give it a try, not dreaming that I would eventually be Chairman of the company.
In 1947, I was asked by the British War Crimes Commission to be a witness at the Minor War Crimes Trials in Japan. The Commandant and 17 of our guards were to be tried for their brutality at our camp. The trial lasted several weeks and they were eventually sentenced to various terms ranging from 30 years to 3. It is interesting to note that all the defense lawyers were sent from the U.S. to do the job. They were very aggressive and tried hard to convince the judges that the evidence presented by the prosecution and supported by witnesses like myself were exaggerated or false. At one point a defense counsel asked me to identify one of the guards by name and I said his name was Fishface. The counsel then said "how is it that you were with this guard for nearly 2 years and you don't know his name is Tanaka?” I replied "because we were never formally introduced" which made the 3 judges and everyone else other than the defense laugh. This incident was reported in all the foreign newspapers.
My first job was manager of NCR Hong Kong, working under George Haynes, who was manager of China based in Shanghai. Those were wonderful years for NCR Hong Kong and myself. Being as Brer Rabbit says: "Firstist with the mostest" and knowing many of the managers and accountants, I succeeded in selling accounting machines to all the banks and utility companies, and many commercial and industrial companies. By 1960, we had 97% of the market.
At that time George Haynes was promoted from Japan to Dayton and I reluctantly left Hong Kong to be Chairman of the Japanese company and vice president for the Far East region.
In 1971 NCR was in serious trouble and was in danger of going out of business. The company had been slow to move from mechanical to electronic products. The Board of Directors with unusual vision of those times decided that there was no one among the 30 officers of the parent company that could do the job of saving the company and I was asked. As happy as I was in Japan, which was at that time the most profitable of all NCR's operations worldwide, I loved and owed the company and accepted.
So in June 1972, I started the transformation of NCR to be a full electronic data processing (EDP) company. Many of you will remember those difficult days and the problems I had. Not only did we have to change the hardware aspects of a mechanical machine business to one making things that worked with bits and bytes, but we had to change the mentality of everyone in the company to do things differently.
I also had problems with an unsympathetic media and the UAW. As this is still a large UAW city, you may be interested to know that NCR was the first company to force the UAW to agree to a two-tier wage system. Against my wishes, I was persuaded to meet with Leonard Woodcock, the head of the UAW at the Dayton Airport Inn. I showed him all our financial statements and told him that we had no alternative but close all our manufacturing in Dayton unless he agreed to a two-tier wage where we would freeze all existing wages but new employees would be paid just a little more than the minimum wage. I must have been convincing enough because he reluctantly agreed. Interestingly, after over 30 years, GM management has finally bitten the bullet and have negotiated a similar contract. One has to ask why it took them so long.
Well as the story goes, "all's well that end's well" and NCR staged a wonderful recovery so that when I retired on the 100th anniversary of our company in 1984, we were in the best shape ever. I stayed on the Board of Directors until 1989 and was not involved in the acquisition of the company by AT&T in 1991.
As all of you know, the so-called merger was a disaster and Bob Allen, the Chairman of AT&T, has been written up as the man who made the worst acquisition in history. He paid $7.4 billion for NCR which was profitable and lost $4 billion in the next four years. In 1996, he announced that there was no synergism between the two companies and split AT&T into three companies, namely: AT&T, Lucent and NCR. As you know, Lucent stock has collapsed since then, and AT&T has been bought by one of the Babybells, SBC. The market cap of NCR after the split was only $3.4 billion. This, added to the $4 billion in losses, cost the shareholders $8 billion in four years. One has to work hard to-do that.
There are various reasons given for this failure. First, the danger for all successful companies, especially those who have a dominant market share, is the arrogance that it breeds. Prior to 1972, NCR had some of this problem also. Although AT&T was a younger company than NCR, their people felt that their culture and name were better than ours. Neither our customers nor our managers felt the same way, so 90 percent of our senior officers and mid-managers left the company. New managers at all levels were hired and fired in rapid succession. Our longtime customers also left us. From annual reports of many companies you read "our people are “our most -important asset." But do companies remember this and practice what they preach? For over 100 years, NCR believed and practiced the principle that all employees were members of our family."
NCR today is alive and well even though it has shrunk in size. Revenues for 2005 were $6 billion -- 1% over 2004. Operating profit was $410 million versus $233 million in 2004. This year second quarter revenue was up 4% with income of $103 million versus $73 million last year.
Many of my friends in Dayton have been phoning to ask me whether rumors that NCR will be moving its headquarters from Dayton. I have checked this with Bill Nuti, the new CEO, who confirms that the rumors are untrue and that NCR has no plans to move. Of course nobody knows what will happen in years to come. You may be interested to know that, when I came to Dayton in 1972, there were similar rumors, perhaps because it would have been easier to change the physical and intellectual assets of NCR from mechanical to electronic products if we were in a new environment. I did not give this much thought because the cost of such a move would have been more than the company could bear.
Since retirement I have served on various stock exchange Boards of Directors, as well as Boards of non-profit organizations, including two which gave me more headaches that I had bargained for. The first was RJR Nabisco where I was one of five board members on the special committee which had to deal with the auctioning of the company. Some of you may have read the book “Barbarians at the Gate” or seen the movie of the same name. The book is more accurate than the movie. Unless you have been involved in a similar undertaking, you have no idea how difficult was for me for about four months. The buy-out by KKR, which to this day is the largest on record at $25 billion plus, did not turn out well and KKR for the first time did not make any money. Incidentally, if you read “Barbarians at the Gate” you 'will note that I was the only Director that would not give an interview or talk to the authors. The same applies to all the newspapers and magazines during the negotiations. Many other directors and officers did talk. Those of you who have followed the saga at Hewlett-Packard, where fellow NCR alum Mark Hurd is CEO, will gather that Directors do talk or leak. When a reporter presses the right ego button, it's amazing how many people are tempted to talk.
The other story concerns the Smithsonian National Board. I was Chairman from 1978 to 1981 and am still an honorary member of the Board. In 1994, the Smithsonian planned an exhibit entitled "The Last Act: The Atomic Bomb and the End of World War II." I was leaked a draft of the exhibit with the full text. Needless to say, I was shocked. In a nutshell, there were many questions on U.S. policies and actions on the dropping of the bomb, implying that the bomb need not have been dropped, as the war would have been won by us soon. Many of these questions were not balanced and implied that the U.S. were aggressors and Japan the victim. Most of the exhibit was about the damage done by the atomic bomb and very little mention was made of the Japanese atrocities throughout Asia and the U.S. casualties sustained all the way from Pearl Harbor through the islands, including Philippines, Okinawa and Iwo Jima. They questioned whether the U.S. demand for unconditional surrender prolonged the war. As you know, this country would never have accepted a negotiated surrender where Japan could keep some of its stolen territory. No mention was made that as long as the war lasted, the U.S. was suffering 900 casualties a day and that an invasion of Japan could have caused casualties of 250,000 in the first planned invasion of Kyushu, and 500,000 for the second invasion on the main island. Needless to say they did not include the number of POWs like myself who would have been executed. Also, the millions of Japanese military and civilians who would have died.
So, I went to war on this and after many tortuous meetings with the head of the Air and Space Museum as well as the Secretary of the Smithsonian, various modifications were made but still not enough to produce a balanced exhibit. The crisis came to an end at a Board Meeting where the head of Air and Space, Martin Harwit, gave a presentation explaining all he had done to appease me and others. I rose to challenge him and pointed out some untruths and where he had not done enough. Others on the Board who I had lobbied for support rose and denounced him even more severely and that afternoon he resigned and the exhibit was canceled. During the months of this traumatic experience, I received hundreds of letters and faxes supporting and urging me not to give up the battle. Martin Harwit later wrote a book in which I am depicted as the bad guy who in his words "lambasted" him at the meeting, prior to his resignation.
I could continue to give you various vignettes of my experiences in business in China, Japan and around the world, as well as experiences and opinions on subjects such as governance of Boards of Directors, ethics, executive compensation, back dating of stock options and other corporate problems, but this would take another one or two meetings which I'm sure you don't want.
I also wanted for the benefit of the Dayton Council of World Affairs members attending this meeting, to give some Views on the U.S. China 'business and political state of affairs and a similar update on Japan, but I'm afraid time does not permit.