THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, November 19, 1995 TAG: 9511210464
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY LON WAGNER, STAFF WRITER
LENGTH: Long : 231 lines
Driving into Smithfield, signs of Joe Luter and Smithfield Foods abound. The world-famous Smithfield ham stands high above the town, as a painted emblem on its water tower. Road signs direct livestock trucks to Smithfield's packing plants across town.
The old downtown has been revitalized, thanks partly to a $350,000 Luter contribution. The Smithfield Inn, which Luter owns, was also recently restored. Many of its dishes feature ham or bacon.
Tasteful bronze statues - one of Ben Franklin near the Post Office, another of a couple snuggled on a park bench - match the bronze pig outside of Luter's office at Smithfield Packing Company. Luter bought the statues on a ski trip to Vail, Colo., and donated them to the downtown.
Out of this 4,700-population town, historic and removed from the metropolitan buzz of the rest of the East Coast, occasionally pops Luter for the rest of Virginia to see.
Luter usually emerges in newspapers and on TV battling state environmental regulators, or as the wealthy CEO of a Fortune 500 company, or when Smithfield Foods is buying out another pork processing company.
Measuring Luter merely by this public face would be like judging a hog-raising contest by eating bacon; the man the public sees is just a taste of the real Luter.
``You know what Joe Luter stands for - capitalism, and Smithfield Foods, and taking care of people that take care of him,'' says George Shipp, a Scott & Stringfellow Inc. stock analyst who has followed Luter since 1982. ``And in a business sense, thinking in the long-term and more or less ignoring Wall Street and doing what he thinks is right, so he's made some enemies.''
Earlier this month, just days before Virginia's statewide elections, Luter had once again popped out of quiet Smithfield and into the spotlight. Sitting in his office at Smithfield Packing Co., over the grinding buzz of the hog processing going on next door, he's speaking forcefully - but not angrily - in defense of his headline-grabbing $100,000 contribution to Republican Gov. George Allen's political action committee.
He is systematically dissecting the criticisms launched his way after the media reported he had made the contribution at the same time his company faces potential heavy fines by the state Department of Environmental Quality for allegedly polluting the Pagan River.
Though Luter, 56, is CEO of a $1.5 billion company, he says he feels defenseless against a liberal media ``that buys ink by the barrel'' and the ``obtrusiveness of the federal government.''
Many of Luter's comments are as in-your-face as they come. They typify the confrontational, unapologetic style he has used to rescue Smithfield Foods from the edge of bankruptcy when he took over 20 years ago and turn it into the second-largest pork processor in the country.
When asked about the two $50,000 political contributions to Allen, Luter fires back, unabashedly.
``My response is that if I couldn't make a political contribution at any time there is an ongoing investigation of a company this size, I would never be able to make a contribution,'' he says. ``At the present time, we have an ongoing investigation with OSHA, the NLRB, the IRS, the EPA, with the Justice Department in regard to the proposed Morrell acquisition and probably three or four more that I'm not even aware of.''
Luter's non-verbal response to the criticism was just as blunt. Days after the flap made Smithfield Foods a campaign issue, Luter wrote Allen's ``Campaign for Honest Change'' PAC a check for another $25,000. Get the point?
``That's like Joe saying, `I'll see you, and raise you $25,000,' '' longtime friend and Smithfield businessman Alan Monette says. ``He's had to call the shots and stand by them. If somebody really pushes him into a corner, he's not going to take it lying down. He's pretty bold.''
Luter has the demeanor to carry off boldness. He's a large man, with glasses, a round face, and piercing eyes. His mind works like a computer - he can be interrupted in mid-sentence, deal with the situation, and pick up the sentence within one or two words of where he dropped it. Friends seem envious of his energy.
To Luter, three of the most dishonorable things a person can do are back down from a confrontation, apologize for an honest decision and not stand up for someone who once stood up for you.
To that end, Luter attacked his attackers on the contribution issue.
``I don't have any apologies to make to anyone,'' Luter says, continuing his speech. ``My conscience is clear. . . I'm not saying I'm angry about it. I'm just saying that I'm not going to let the liberal media and some Democratic demagogues intimidate me.
``I think corporate America, for the most part, should be criticized, because most of them are not willing to take stands because it hurts them. As a result, I don't think the message of the good that corporate America is doing in this country is getting out.
``I'd like to be quoted on that.''
As much as the famous Smithfield ham, Valleydale bacon or Esskay franks Smithfield Foods produces, Joseph Williamson Luter III is a product of the brutal ``pork-packing'' industry. Smithfield - and therefore Luter - has fought for every gain it made over the past 20 years. It has faced health-conscious Americans turning away from fatty meats like bacon and environmental laws clamping down on the bloody byproducts of hog slaughtering.
One well-known headbutting between Smithfield Foods and environmental law came in 1989. The state proposed a lower limit on phosphorous emissions in trying to clean up the Chesapeake Bay. Luter stood at a public hearing, said his two packing plants couldn't meet the limits, and said Smithfield Foods would have to leave Virginia if the new limit were imposed.
The new limit was imposed. Luter announced a major expansion would be in Bladen County, N.C. In the past three years, Smithfield Foods' has spent $200 million on a processing plant in Bladen County, N.C., and has hired 3,500 workers. Smithfield Foods' now slaughters more hogs in North Carolina than in its home state, and no future growth is planned for Virginia.
``He told them he'd do that,'' Monette said. ``I guess they took it as a threat rather than a statement of fact.''
If, in the course of defending his company, Luter has offended someone or made another enemy, so be it.
``I had a daughter that was very upset a number of years ago because this girl didn't like her,'' Luter says. ``I told her, `Leigh, if 259,950,000 people in this country don't like you, that leaves 50,000 people, and that's more friends than you can ever have.'
``So that's my logic. It's a big world out there.''
Luter discovered that big world early through the pork packing business. Both his grandfather, Joseph W. Luter Sr., and his father worked for Gwaltney of Smithfield, the company that began curing Smithfield hams in 1879. In 1936, three years before his son would be born, Joseph Jr. talked his father into starting up a competitor. The younger Luter had learned the business early in life. When Joe Luter Sr. lost his eyesight, he guided his father on sales trips for Gwaltney.
Despite skipping weeks of school at a time, Joseph Jr.'s naturally analytical mind not only allowed him to graduate high school, but to finish at the head of his class.
Joe Luter III, who had wanted to go to law school, threw himself into the family business after his father died suddenly in 1962. Luter graduated from Wake Forest three months later and took a sales job at Smithfield Packing. In 1966, he became president at age 27.
But three years later Washington-based Liberty Equities Corp. bought Smithfield for $20 million, and in January 1970 Luter was fired. He headed to the mountains where he developed Bryce Mountain Ski Resort.
It didn't take long for Luter to make a comeback. By April 1975, Smithfield Foods was bleeding money: it had lost $3.6 million in 1973, another $8 million in 1974, and was on the brink of defaulting on its loans.
For Luter, ski season was over. He began telling board members that if they didn't make a change, and quickly, the company could go under. The board agreed, brought him back to head the company, and he saved it. In one year, he turned the $8 million loss into a $393,000 profit.
In the 20 years that followed, Smithfield Foods barged forward, squeezing out profits by claiming a larger and larger piece of a stagnant industry. Smithfield became a Fortune 500 company, a status it lost last year when Fortune magazine added computer software companies and other service sector businesses to the traditionally industrial-company ranking.
Smithfield grew by swallowing weaker pork processors during down cycles in the industry. In 1981, Smithfield bought hometown competitor Gwaltney of Smithfield and doubled its size. This fall, Smithfield announced its intent to acquire Midwest pork-packer John Morrell & Co., which would double Smithfield's annual sales to about $3 billion and put it back in the Fortune 500.
Times have been particularly tough in the pork industry for much of this year, which means Smithfield is hurting along with every other pork processor. Following Luter's pattern, that meant it was time for Smithfield to gobble up Morrell.
``If you understand the industry, the cycles are usually short-lived,'' Luter says. ``There are times when we might bleed, but some of our competitors will hemorrhage when times get tough. Does it take a certain amount of risk? I guess it does.''
As Smithfield Foods has grown, so has Luter's wealth. At the present price of $29 1/2, the value of Luter's 2.5 million shares of Smithfield stock is nearly $74 million. Like his business decisions, Luter does what he wants with the money. It seems, though, that for every bold addition to his lifestyle Luter matches it with an often quiet contribution to Smithfield or somewhere else.
The flashy side shows itself in the large BMW he drives, or the Ferrari Testarossa on which he once posed for a magazine cover eating a hot dog. The ``Hot Dog!'' headline and cover story hang framed on his office wall.
``They talked me into that,'' he says of the pose. ``I knew it looked foolish at the time. My secretary put that up there.''
Some locals compare Luter's 2,000 acre estate along the Pagan River to Michael Jackson's ``Wonderland'' complex in California. Over the objections of a neighbor, Luter connected two farms along the Pagan with a 10-foot-high, 450-foot-long footbridge across Tormentor Creek, a thin, marshy stream that meanders into the Pagan. Again, Luter had no regrets about the squabble with the neighbor.
``I'm reluctant to get too personal,'' he said. ``I really don't care. If you're happy with yourself and content with the way you've done things, I don't worry about any particular individual, whether they like it or like me. It doesn't make any difference.''
Matching that footbridge is a fishing pier Luter built on the Pagan and gave town residents permission to use, Town Manager Ken McLawhon said. He's also donated $1 million to Wake Forest University, his alma mater. The bronze figures he bought for downtown Smithfield cost close to $100,000, said John Edwards, president of Historic Smithfield Inc.
Smithfield Foods also gave $1 million to the Diabetes Institute at Eastern Virginia Medical School in Norfolk within the past 18 months. The company stipulated that no press release should follow the donation. Many other Luter contributions have gone unpublicized, Edwards said, ``because he didn't want to appear to do something to enhance his reputation.''
Other times, the motivation behind a large contribution is less clear. Smithfield Foods made a $750,000 grant to the nutritional center at Duke University to study the fat content of the company's Lean Generation pork, a new, genetically-engineered pig on which the company is pinning its future growth.
The results, just released a few weeks ago, were that Lean Generation pork is comparable to chicken for a person seeking to limit fat content in their diet. Luter says there's no reason to question the outcome.
``Do you think an institution of Duke's reputation, of Duke's historical integrity would be compromised by $750,000?'' he asks. ``Of course not. Do you think George Allen's price is $100,000? Of course not.''
Luter admits he's ``combative by nature.'' But to Luter, the questions and criticisms that at times bring out an even more defiant side are just part of doing business.
He tells a story that he thinks sums up his experience.
``There's an old saying of a father walking his son through a cemetery one day and they came upon a tombstone: `Here lies George Brown, a man who had no enemies.' The son said, `Gee.' The father said, `Son, he must not have done a damn thing in his life.' '' ILLUSTRATION: Color photo
RICHARD L. DUNSTON/The Virginian-Pilot
Smithfield Foods CEO Joseph W. Luter III sits in office. Over his
shoulder is a portrait of his grandfather, Joseph W. Luter Sr., who
founded the company in 1936.
Photos
FILE\The Virginian-Pilot
The Smithfield Foods packing plant borders the Pagan River. The $1.5
billion company employs more than 4,000.
Graphic
Joseph Williamson Luter III
[For complete graphic, please see microfilm]
KEYWORDS: PROFILE BIOGRAPHY SMITHFIELD FOODS by CNB