Smith & Wesson Retools Image as Lawsuits Falter
The Wall Street Journal
Wednesday, October 16, 2002
VANESSA O'CONNELL and PAUL M. BARRETT
Momentum Shifts in Gun-Control Battle,
With White House Backing the Industry
SPRINGFIELD, Mass. -- For a brief time, one of the most fabled names in the gun business looked set to play the role of peacemaker.
In March 2000, Smith & Wesson, a unit of British conglomerate Tomkins PLC, agreed to settle a raft of government lawsuits by promising to restrict the marketing of its handguns. For gun-control advocates, it was a stunning victory. President Clinton hailed the pact as historic, asserting it would sharply reduce the flow of handguns to criminals.
But the detente didn't last long. Under withering fire from pro-gun forces and facing a catastrophic drop in sales, Smith & Wesson started retrenching. Ed Shultz, the Smith & Wesson CEO who made the deal, resigned, and Tomkins last year sold the unit at a bargain price. The new owners -- who include a former S&W sales chief and the founder of a tiny Scottsdale, Ariz., gun-lock company -- have returned the company to good standing with the gun lobby. And sales have rebounded smartly.
Smith & Wesson's about-face is part of a wholesale shift in the dynamics of gun control. In Washington, the Bush administration has offered gun interests staunch support, whereas the Clinton White House actively encouraged the late-1990s legal assault against the industry. Meanwhile, in courtrooms around the country, judges have dismissed 10 of the 21 lawsuits filed by local governments seeking to hold firearm companies accountable for death and injury caused by shootings. The legal assault remains a threat. But so far, the plaintiffs' side hasn't turned up the sort of smoking-gun evidence that in earlier litigation by the states brought the tobacco industry to the bargaining table.
The industry faces a sensitive new challenge as the unsolved sniper shootings in the Washington, D.C., area prompt calls for new regulations. Some lawmakers have renewed a push for a national database of ballistic information about all guns made in or imported to the U.S. This could potentially help investigators trace the etchings on shell casings or slugs found at a crime scene to a particular weapon.
But right now, with war clouds gathering in the Middle East and Congress about to go into recess just a few weeks before midterm congressional elections, prospects for such legislation appear slim. The National Rifle Association has firmly opposed the measure as a back-door form of gun registration. Gun manufacturers question the efficacy of the technology and would like to postpone any decision until there has been much more testing. Overall, the U.S. gun industry is presenting a united -- and formidable -- front again. Having made an example of Smith & Wesson, the gun lobby has been emboldened, and nobody in the business is likely to step out of line again any time soon.
Smith & Wesson has long been an icon of the American gun world. Founded 150 years ago by firearm pioneers Horace Smith and Daniel B. Wesson, it established itself during the gun-making boom of the Civil War. In 1987, the company was bought by Tomkins, which makes construction products and industrial parts. It is the second-largest U.S. gun company, specializing in medium- and high-priced handguns generally retailing for $300 to $600 each.
Beginning in 1998, the gun industry was deluged by suits filed by cities and counties emulating the states' earlier legal assault on cigarette makers. Most of the suits demanded reimbursement from the industry for the vast police and public-medical costs related to gun violence. Gun companies countered that they weren't any more responsible for criminal shootings than car makers are for drunk-driving deaths.
Litigation expenses were siphoning hundreds of thousands of dollars a year away from S&W's modest bottom line. Tomkins wanted to shed the company, but the shadow of the lawsuits was discouraging potential buyers. Then, in early 2000, the situation suddenly shifted.
Secret Emissaries
The Clinton administration, eager to take charge of the antigun litigation, secretly sent emissaries to Mr. Shultz after he hinted in interviews that he would consider conciliation. A onetime furniture-manufacturing executive hired to run S&W in 1992, Mr. Shultz, now 60 years old, didn't view guns with the emotionalism common on both sides of the firearm debate. Weeks of covert negotiations led to an unprecedented agreement on March 17, 2000.
In a first for a major U.S. gun maker, S&W vowed to go far beyond existing legal requirements to police how its products were sold at retail. In return, the White House agreed not to file a threatened federal class-action suit against the industry and to persuade the municipalities to call off their legal actions against S&W.
Cries of treachery came swiftly from pro-gun forces. "Smith & Wesson, a British-owned company, recently became the first to run up the white flag of surrender and run behind the Clinton-Gore lines, leaving its competitors in the U.S. firearm industry to carry on the fight for the Second Amendment," the NRA declared in one of a barrage of Internet alerts and mass faxes. Other gun manufacturers, who sell their wares to the NRA's constituency, took note. Glock GmbH had negotiated secretly with the Clintonites in early 2000, but the Austrian pistol maker cut off all talks after March 17, in large part because it didn't want to get caught up in the firestorm.
Egged on by the NRA, which provided S&W's phone and fax numbers, as well as Mr. Shultz's e-mail address, gun owners bombarded the company with hostile messages. Web sites such as thefiringline.com (www.thefiringline.com) and glocktalk.com bristled with calls for an S&W boycott. L. Neil Smith, a science-fiction author and mini-celebrity in certain gun-owner circles, wrote a widely distributed e-mail chain letter that repeated 13 times the refrain, "Smith & Wesson must die." Mr. Smith says he was urging only economic harm.
"People felt that they were betrayed by the company," says Sanford M. Abrams, a retail gun dealer in Baltimore and a member of the NRA's national board. He pulled down S&W banners, removed the company's revolvers from his shelves and ceased ordering new ones.
The settlement provisions that most offended dealers required that S&W sell its guns only through authorized retailers. The dealers would have to agree to new curbs on selling a customer multiple guns, operating at lightly regulated gun shows, and other transactions. Doug Kiesler, who cleared his Jeffersonville, Ind., store of S&W merchandise, says he told customers that "to settle a couple of lawsuits, Smith & Wesson sold its soul to the Clinton administration."
S&W sales began to drop almost immediately. "It's not about money, it's about freedom," gun enthusiast Bob Curtis of Overland Park, Kan., recalls thinking in the spring of 2000, when he was in the market for a new revolver. He spurned S&W and bought one made by a Brazilian manufacturer.
By the fall of 2000, industry officials estimate that S&W retail sales had declined by 40% to 60%, compared with 1999. Making matters worse for the company, only one city, Boston, in S&W's home state, actually went ahead and signed a binding court document to drop the company from its gun-industry suit. In response to the backlash, S&W had begun to debate the fine print of the federal settlement with gun-control lawyers, who successfully urged the municipalities to hold off on signing. The company thus was being economically punished for a legal truce from which it barely benefited.
In October, Mr. Shultz resigned. Tomkins had sold a separate U.S. outdoor-equipment unit, which he also ran, and he says he decided to leave the gun world and focus exclusively on that business. With a caretaker president installed at S&W, Tomkins tried to sell the company but found that rival gun makers weren't interested, industry executives say.
One person watching S&W's travails was Robert Scott, a popular gun-industry veteran who had worked for S&W in sales for most of the 1990s. Many thought Mr. Scott, now 56, would head the company one day, but he got only as far as vice president for business development. In 1999, he left S&W to become president of Saf-T-Hammer Corp., a fledgling Scottsdale gun-lock manufacturer.
Mr. Scott perceived early on that S&W's fortunes could change dramatically. After George W. Bush was finally declared the winner of the messy 2000 presidential election, the new White House team signaled that the pro-gun former governor of Texas wasn't going to hold the industry to the Clinton settlement. If new owners were willing to take a risk on a legally besieged industry -- and could restore S&W's image as a storied American business -- perhaps the company could be righted. Mr. Scott called Tomkins to begin discussions.
The Wall Street Journal
Wednesday, October 16, 2002
VANESSA O'CONNELL and PAUL M. BARRETT
Momentum Shifts in Gun-Control Battle,
With White House Backing the Industry
SPRINGFIELD, Mass. -- For a brief time, one of the most fabled names in the gun business looked set to play the role of peacemaker.
In March 2000, Smith & Wesson, a unit of British conglomerate Tomkins PLC, agreed to settle a raft of government lawsuits by promising to restrict the marketing of its handguns. For gun-control advocates, it was a stunning victory. President Clinton hailed the pact as historic, asserting it would sharply reduce the flow of handguns to criminals.
But the detente didn't last long. Under withering fire from pro-gun forces and facing a catastrophic drop in sales, Smith & Wesson started retrenching. Ed Shultz, the Smith & Wesson CEO who made the deal, resigned, and Tomkins last year sold the unit at a bargain price. The new owners -- who include a former S&W sales chief and the founder of a tiny Scottsdale, Ariz., gun-lock company -- have returned the company to good standing with the gun lobby. And sales have rebounded smartly.
Smith & Wesson's about-face is part of a wholesale shift in the dynamics of gun control. In Washington, the Bush administration has offered gun interests staunch support, whereas the Clinton White House actively encouraged the late-1990s legal assault against the industry. Meanwhile, in courtrooms around the country, judges have dismissed 10 of the 21 lawsuits filed by local governments seeking to hold firearm companies accountable for death and injury caused by shootings. The legal assault remains a threat. But so far, the plaintiffs' side hasn't turned up the sort of smoking-gun evidence that in earlier litigation by the states brought the tobacco industry to the bargaining table.
The industry faces a sensitive new challenge as the unsolved sniper shootings in the Washington, D.C., area prompt calls for new regulations. Some lawmakers have renewed a push for a national database of ballistic information about all guns made in or imported to the U.S. This could potentially help investigators trace the etchings on shell casings or slugs found at a crime scene to a particular weapon.
But right now, with war clouds gathering in the Middle East and Congress about to go into recess just a few weeks before midterm congressional elections, prospects for such legislation appear slim. The National Rifle Association has firmly opposed the measure as a back-door form of gun registration. Gun manufacturers question the efficacy of the technology and would like to postpone any decision until there has been much more testing. Overall, the U.S. gun industry is presenting a united -- and formidable -- front again. Having made an example of Smith & Wesson, the gun lobby has been emboldened, and nobody in the business is likely to step out of line again any time soon.
Smith & Wesson has long been an icon of the American gun world. Founded 150 years ago by firearm pioneers Horace Smith and Daniel B. Wesson, it established itself during the gun-making boom of the Civil War. In 1987, the company was bought by Tomkins, which makes construction products and industrial parts. It is the second-largest U.S. gun company, specializing in medium- and high-priced handguns generally retailing for $300 to $600 each.
Beginning in 1998, the gun industry was deluged by suits filed by cities and counties emulating the states' earlier legal assault on cigarette makers. Most of the suits demanded reimbursement from the industry for the vast police and public-medical costs related to gun violence. Gun companies countered that they weren't any more responsible for criminal shootings than car makers are for drunk-driving deaths.
Litigation expenses were siphoning hundreds of thousands of dollars a year away from S&W's modest bottom line. Tomkins wanted to shed the company, but the shadow of the lawsuits was discouraging potential buyers. Then, in early 2000, the situation suddenly shifted.
Secret Emissaries
The Clinton administration, eager to take charge of the antigun litigation, secretly sent emissaries to Mr. Shultz after he hinted in interviews that he would consider conciliation. A onetime furniture-manufacturing executive hired to run S&W in 1992, Mr. Shultz, now 60 years old, didn't view guns with the emotionalism common on both sides of the firearm debate. Weeks of covert negotiations led to an unprecedented agreement on March 17, 2000.
In a first for a major U.S. gun maker, S&W vowed to go far beyond existing legal requirements to police how its products were sold at retail. In return, the White House agreed not to file a threatened federal class-action suit against the industry and to persuade the municipalities to call off their legal actions against S&W.
Cries of treachery came swiftly from pro-gun forces. "Smith & Wesson, a British-owned company, recently became the first to run up the white flag of surrender and run behind the Clinton-Gore lines, leaving its competitors in the U.S. firearm industry to carry on the fight for the Second Amendment," the NRA declared in one of a barrage of Internet alerts and mass faxes. Other gun manufacturers, who sell their wares to the NRA's constituency, took note. Glock GmbH had negotiated secretly with the Clintonites in early 2000, but the Austrian pistol maker cut off all talks after March 17, in large part because it didn't want to get caught up in the firestorm.
Egged on by the NRA, which provided S&W's phone and fax numbers, as well as Mr. Shultz's e-mail address, gun owners bombarded the company with hostile messages. Web sites such as thefiringline.com (www.thefiringline.com) and glocktalk.com bristled with calls for an S&W boycott. L. Neil Smith, a science-fiction author and mini-celebrity in certain gun-owner circles, wrote a widely distributed e-mail chain letter that repeated 13 times the refrain, "Smith & Wesson must die." Mr. Smith says he was urging only economic harm.
"People felt that they were betrayed by the company," says Sanford M. Abrams, a retail gun dealer in Baltimore and a member of the NRA's national board. He pulled down S&W banners, removed the company's revolvers from his shelves and ceased ordering new ones.
The settlement provisions that most offended dealers required that S&W sell its guns only through authorized retailers. The dealers would have to agree to new curbs on selling a customer multiple guns, operating at lightly regulated gun shows, and other transactions. Doug Kiesler, who cleared his Jeffersonville, Ind., store of S&W merchandise, says he told customers that "to settle a couple of lawsuits, Smith & Wesson sold its soul to the Clinton administration."
S&W sales began to drop almost immediately. "It's not about money, it's about freedom," gun enthusiast Bob Curtis of Overland Park, Kan., recalls thinking in the spring of 2000, when he was in the market for a new revolver. He spurned S&W and bought one made by a Brazilian manufacturer.
By the fall of 2000, industry officials estimate that S&W retail sales had declined by 40% to 60%, compared with 1999. Making matters worse for the company, only one city, Boston, in S&W's home state, actually went ahead and signed a binding court document to drop the company from its gun-industry suit. In response to the backlash, S&W had begun to debate the fine print of the federal settlement with gun-control lawyers, who successfully urged the municipalities to hold off on signing. The company thus was being economically punished for a legal truce from which it barely benefited.
In October, Mr. Shultz resigned. Tomkins had sold a separate U.S. outdoor-equipment unit, which he also ran, and he says he decided to leave the gun world and focus exclusively on that business. With a caretaker president installed at S&W, Tomkins tried to sell the company but found that rival gun makers weren't interested, industry executives say.
One person watching S&W's travails was Robert Scott, a popular gun-industry veteran who had worked for S&W in sales for most of the 1990s. Many thought Mr. Scott, now 56, would head the company one day, but he got only as far as vice president for business development. In 1999, he left S&W to become president of Saf-T-Hammer Corp., a fledgling Scottsdale gun-lock manufacturer.
Mr. Scott perceived early on that S&W's fortunes could change dramatically. After George W. Bush was finally declared the winner of the messy 2000 presidential election, the new White House team signaled that the pro-gun former governor of Texas wasn't going to hold the industry to the Clinton settlement. If new owners were willing to take a risk on a legally besieged industry -- and could restore S&W's image as a storied American business -- perhaps the company could be righted. Mr. Scott called Tomkins to begin discussions.
