published Tuesday, January 18th, 2011

The Rise of Bill Haslam: The Haslam family business takes off

By Josh Flory/The Knoxville News Sentinel
  • photo
    Photo Submitted by Pilot Corp./Moxley Carmichael Bill, Jimmy and Jim Haslam stand in front of a Pilot Gas pump in 1977.

Third in a series

By the mid-1970s, the family business founded by Jim Haslam was on the verge of a breakthrough.

With the fuel industry changing rapidly, the founder of Pilot Oil Corp. was trying to keep his company ahead of the wave, and over the next decade and a half, the family's second generation would play a major role in making it happen.

But the three children of Jim Haslam and his late wife, Cynthia, approached the company in far different ways, and by the time a new century dawned it was becoming clear that only one of them was likely to make Pilot his life's work.

James A. "Jimmy" Haslam III always knew he wanted to work at Pilot, and even as a young man had begun showing the intense focus and drive that would become his hallmark.

Bobby Reagan, now the CEO of an Atlanta consulting firm, was a fraternity brother of Jimmy Haslam at the University of Tennessee and recalled his friend as an outgoing and upbeat guy who was very competitive. Reagan recalled one occasion when he was playing in an intramural football game at UT and "got my chin busted open."

With blood flowing and a flap of skin hanging down, Reagan started to walk out of the game. His friend, he said, grabbed him and asked what he was doing. "We'll take care of that after the game," Haslam said.

After his mother's death in 1974 -- but before he graduated from UT -- Jimmy Haslam took her seat on the Pilot board and began working at the company full time in August 1976.

The family business

The industry was changing, with profit margins on the sale of gasoline too small to support the business in the long run. Pilot needed to move into the convenience-store business -- selling more food and other retail items -- and Jim Haslam wanted his son to figure out how to do it.

"Hell, I'm 22 years old," Jimmy Haslam recalled. "I don't know anything, right?"

Jim Haslam gave his son a list of five people around the country who understood that business and told him to go talk to them. Armed with a legal pad, Jimmy Haslam said, he would stay two or three days and ask a million questions -- "most of (the questions) probably weren't very smart" -- and eventually Pilot decided it made sense to hire outside expertise to ease its transition into the C-store business.

The process had been a learning experience, though, and an early indication that Jim Haslam was planning to share a large amount of responsibility with his sons.

Jimmy Haslam's younger sister, Ann Haslam, went in a different direction. After her mother's death, Ann took over many of the family's domestic duties and eventually took up a teaching career at the Knoxville Adaptive Education Center, a school for children with disabilities.

In 1988, she married Steve Bailey, the owner of a lumber wholesaling company and a childhood friend of the family who had three children from a previous marriage. With a new family of her own, Ann ended her teaching career and said later that she never really considered working at Pilot.

When it came to Pilot, it was the baby of the family who did the most soul searching. Bill Haslam already had shown a willingness to forge his own path, leaving Knoxville to attend Emory University in Atlanta, where -- like his father and brother -- he joined the Sigma Chi fraternity, and struck up a friendship with a fellow student named Crissy Garrett.

Garrett was a Memphis native and, like Bill Haslam, had a prominent father. Edward Garrett had trained with famed heart surgeon Michael DeBakey, and Garrett worked on the first successful heart bypass operation in 1964.

Bill Haslam and Crissy Garrett also shared a familiarity with unexpected tragedies. While Crissy was a student at Emory, her younger sister was killed in a car accident, and she called Bill in the early-morning hours to ask if he would drive her to the airport. She said later that she knew Bill had lost his mother, "and I knew that he would understand -- or, you know, he wouldn't care if I was just sobbing in the car."

Haslam called her frequently after Crissy went home, and they began dating a short time later. In 1981, the couple -- both 22 years old -- married.

During his last two years at Emory, Bill Haslam -- who graduated in 1980 -- was eyeing a post-college career path in which he would teach high school history for a couple of years and then go to seminary. But he was keeping his options open.

Jim Haslam recalled that at one point he went for a jog with his two sons on Cherokee Boulevard, and Bill raised the issue of what his role would be if he came to work at Pilot.

Answering a calling

It was a surprise to his father, but Jim Haslam very much wanted his younger son to join the family business.

"So we went over ... the things he could do and would do," Jim Haslam said, "and when we finished running I said, 'Are you really serious?' and he said, 'I'm not sure.'"

In seeking counsel, Bill also provided a glimpse of his people skills, asking Natalie Haslam -- who had married his father in 1976 -- what she thought he should do. Interviewed decades after the fact, Natalie Haslam declined to say what counsel she offered but recalled Bill's query as "one of the greatest compliments."

Despite getting some teaching offers, Bill Haslam decided to work for Pilot, with the idea of learning a little about the business world before going on to seminary and a career as a minister.

After seriously considering the ministry, though, Bill Haslam eventually decided to stick with Pilot.

  • photo
    Knoxville News Sentinel Pilot Oil Corp. executives James Haslam III, James Haslam II, and William "Bill" Haslam at the construction site of Central Park West where they opened the new corporate headquarters in 1993.

"I had gotten real involved in our church," he recalled, "and it just became apparent to me that ... the role of a pastor or assistant pastor maybe wasn't what I was called to do."

By the time Bill Haslam arrived at Pilot, the company was changing -- again. Pilot already had moved from gas stations to convenience stores, and around 1980 a friend contacted Jimmy Haslam about a new innovation in Slidell, La.

As Jimmy recalled it, he and his father flew into the city's tiny airport one night in their small Baron plane, barely missing the pine trees, and Jim Haslam declared that they would never return. But as it turned out, the man who owned the truck stop in Slidell, Ken Pritchard, was a former UT football player, and the ex-Vols hit it off instantly.

Pritchard's idea was to combine a gas station/convenience store with diesel pumps for truckers. Jimmy Haslam said Pritchard's Slidell travel center was selling a million gallons of fuel a month, compared to about 100,000 for a typical Pilot location, and Haslam said he probably returned to Pritchard's three locations 10 times with a legal pad "and shamelessly copied everything."

In 1981, Pilot opened its first travel center in Corbin, Ky. At the time, the company still was paired with Marathon, but the oil giant was focused mainly on the Southeast and Midwest -- and Pilot's ambitions were expanding.

Jimmy Haslam said he and his brother saw a fuel-industry landscape with a "million people" in the convenience store business but not many in the truck-stop business and realized an opportunity to build them all over the country. Marathon wasn't interested in such a large expansion, though, and in 1988 the two companies split up, with Pilot -- according to Jimmy Haslam -- giving Marathon some C-stores, truck stops and cash to exit the marriage.

No longer backed by a giant oil company, Pilot considered the overtures of Wall Street. The company began preparing for an initial public offering of stock, a move that would have provided an injection of cash, but also required far more openness and brought constant pressure for quarterly profit growth.

Top Pilot executives went on a "road show" -- an industry term for a series of sales pitches to potential investors -- but realized that the company's shares weren't going to draw the price they had expected. The company's board met, and the IPO was deep-sixed.

At the time, Pilot didn't even have a chief financial officer and, according to Jimmy Haslam, they realized that "the business is to the size now where you can't run it out of your back pocket ... which is kind of how we were doing it."

The company quickly went about addressing shortcomings in the talent department. Jeff Cornish was working as a consultant in Florida and got a call from a headhunter who was trying to fill a CFO position with a family business in Knoxville.

Cornish said Bill Haslam traveled to Orlando and interviewed him, and he then met with the company's board at the Blackberry Farm resort. While Pilot had antiquated systems and lacked some of the necessary infrastructure to support its growth, Cornish said, it looked like a serious business and not the sort of place where needed capital was spent to support the family members.

"I took it that they really ran the business as a business," he said.

The flirtation with Wall Street in the past, Cornish said Pilot looked to plow cash flow back into the business and do it in a way that could avoid high levels of debt. Also in the early 1990s, according to Jimmy Haslam, Pilot partnered with Louis Dreyfus, the French conglomerate that got its start in the commodities business.

Renewing old alliances

The Dreyfus investment powered more expansion, and in 1994 Pilot grew again with the acquisition of 11 Pro Stop travel centers in five states. That deal made it the country's second-largest truck-stop chain, with 66 travel centers that it owned and operated along with 50 convenience stores in Tennessee and Virginia.

The following year, Pilot Corp. made official a transition that had been years in the making, announcing that Jimmy Haslam would take over as CEO, with Bill Haslam stepping into the president's role and Jim Haslam staying on as the company's chairman.

Jimmy Haslam, Cornish said, is "a guy who will every day of the week have a game plan for that day -- and (a) pretty detailed game plan -- and he really won't forget things that he's asked you to do, or things ... that (are) on your plate. And that's good."

By the end of the decade, the family was thinking about options to diversify its investment in Pilot. With competition increasing in the travel-center industry, according to Jimmy Haslam, Pilot wanted to be in position to make acquisitions rather than be an acquisition target. The company hired Morgan Stanley to explore its options.

And as it turned out, Pilot's old partner -- Marathon -- looked like the best bet. Jimmy Haslam said the two sides began talking between Christmas and Thanksgiving of 2000, and on the Friday before Memorial Day a handful of people crowded into his office for a daylong session, writing the outline of the deal on a whiteboard.

"And I remember telling the person that cleans the office, do not under any circumstances erase this," Jimmy Haslam recalled.

The deal closed on Aug. 31, 2001. Pilot Corp. would team with Marathon Ashland Petroleum LLC -- itself a joint venture between Marathon Oil Co. and Ashland Inc. -- as 50-50 partners in a new venture called Pilot Travel Centers LLC, which would have 235 locations and some 11,000 employees.

Changing the game plan

It was a time of monumental change for Pilot, but Bill Haslam's attention had already begun to shift.

For years, his family had taken annual beach trips with a group of friends, including David Bowen, who had been a teacher and coach at Webb School of Knoxville before going on to divinity school.

Bowen recalled that in the mid-1990s, the couples together read a book called "Half Time: Changing Your Game Plan from Success to Significance." The book's author wrote of achieving business success and a strong marriage, but still feeling unfulfilled, and argued that the second half of one's life can be a time of "personal renaissance."

At the time, Bill Haslam was considering what the rest of his life should look like.

"Maybe because I'd come to Pilot thinking I was going to be there for a short period of time ... I never really thought, 'Well, this is what I'm going to do with my entire working career,'" he said later. "And so ... in the back of my mind I'd thought, you know, I think there's a real chance I'd do something else at some point. I just couldn't have told you what that was."

In 1999, Bill Haslam announced he had taken a new job, heading up the fledgling Internet retail operation of upscale apparel chain Saks. The retailer was led by Brad Martin, a family friend and Pilot board member.

The Saks move illustrated the value of family connections for a guy with no track record in fashion or technology.

All Fired Up

By February 2001, Bill Haslam had moved out of management at Saks and into a consulting role, although he didn't leave the retail industry entirely. That same year, he joined the board of Dallas-based clothing chain Harold's Stores Inc. at the invitation of Ronald de Waal, an investor in the Texas company and the vice chairman of Saks Inc. Bill Haslam would serve as the nonexecutive chairman of Harold's for several years, but the company would eventually collapse.

Another new opportunity arose in the same year, one that turned out to be more promising. Haslam was vacationing in Florida at the same time as Bob Corker, a longtime family friend and the newly elected mayor of Chattanooga, and the two men ended up going for a bike ride. A couple of weeks earlier, as Haslam recalled it, someone had mentioned the idea of a mayoral run to him. During the bike ride, Corker described the ability of a mayor to make an impact.

When he returned from the ride, Crissy Haslam said, her husband was "kind of fired up" about the idea. "And he basically kind of told me the things they talked about," she said. "And I thought, 'Uh-oh.'"

In an interview, Crissy Haslam said Corker's arguments about having an impact made sense and that she knew there was "something out there" for her husband to do, but indicated that the job of mayor was not one she had thought about.

Haslam floated the idea to a group of friends from Cedar Springs Presbyterian Church that he meets with on Friday mornings -- most recently including attorney Herbert Slatery, Young Life executive Steve Chesney, banker David Reynolds and dentist Dan Crawford. The late Lee Scruggs was a participant prior to his death in 2004. Bill Haslam received a more positive response than he expected.

He began sounding out a wide variety of people about the race, and in June 2002 he named a campaign treasurer. He didn't know it yet, but he had finally found his calling.

News Sentinel business writer Josh Flory may be reached at 865-342-6994.



ABOUT THIS SERIES

When Bill Haslam was sworn in Saturday as Tennessee’s 49th governor, it capped a family rise to prominence that began some 60 years ago. The Knoxville News-Sentinel, a member with the Chattanooga Times Free Press of the Tennessee Newspaper Network, documented the family’s journey to wealth and power.

Sunday: Jim Haslam, family patriarch

Monday: The young Haslam family and the start of Pilot Oil Corp.

Today: Pilot gets bigger

Wednesday: The emergence of Bill Haslam

Thursday: The rise of Jimmy, and the Haslam family’s philanthrophy

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Comments do not represent the opinions of the Chattanooga Times Free Press, nor does it review every comment. Profanities, slurs and libelous remarks are prohibited. For more information you can view our Terms & Conditions and/or Ethics policy.
EaTn said...

One of Haslam's first executive orders as governor was to eliminate the requirement that the governor and top aides disclose outside income. This has cost him credibility that I doubt will soon go away since it shows where his priorities lie.

January 18, 2011 at 3:56 p.m.
ceeweed said...

With yearly revenues of 20 billion, that is indeed a successful family business. Since only the very well-heeled can afford to run for office, Being somewhat cynical, I have to wonder why a multi-millionare would want to be the governor. I guess Haslam cleared my wonderment up on his first day at the helm. But governor, don't think your executive order will deter the watch dogs, in fact, they will just sniff harder to detect any conflict of interest your secrecy may conceal.

You cannot treat voters the same way you raise mushrooms by keeping them in the dark and feeding them manure.

January 18, 2011 at 6:18 p.m.
SavartiTN said...

Is this supposed to be a "feel good" piece? I feel nauseated.

January 18, 2011 at 10:08 p.m.
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