I had a great deal of faith in the plane we were going to develop, the 880. I didn’t want my competition using it – Pan Am and American and United. So Convair and I reached an understanding that they wouldn’t sell the 880 to anybody except TWA and airlines such as Delta who flew other routes and weren’t in competition with TWA. Now that, you must admit – to agree to a restrictive condition like that – was pretty dumb of them.
There was a time limit, of course. But by the time the time limit was up, United and American had committed themselves to planes from Boeing and Douglas, and Convair wound up holding the bag – the empty bag. They blamed me, but all I did was negotiate powerfully. If they had negotiated powerfully against me, we would have come to some more reasonable arrangement.
I knew Jack Zevely was under a lot of pressure, especially during these design sessions with me. He wasn’t used to staying up all night. Moreover, I had an advantage in that I absolutely controlled my company. For all practical purposes I owned TWA, whereas Zevely and all these guys I dealt with were representing a bunch of stockholders and had to watch their step.
But I tried to do everything I could for the man. Once, after we’d been talking half the night, I said, ‘What you need is a little pick-me-up, Jack, and I’m going to take you to the movies.’ I arranged a private midnight showing of a new film at RKO – Jet Pilot. I got Janet Leigh to come down, and Janet sat next to him during the show and cuddled up to him. He fell sound asleep.
Jack Zevely made a very unkind remark afterwards. He said the 880 was not named after the eighty-eight seats it was supposed to have, but for the ‘880 ridiculous goddamnned conferences’ he’d had with Howard Hughes.
I hadn’t picked up these 880s yet, because the changes hadn’t been made that I had insisted on. I decided I didn’t want the planes. They hadn’t styled them exactly the way I wanted them, but I said to myself, ‘Jesus, I’ve got to give these guys a break.’ And they’d come up with a new plane by then, the Convair 990, so I said, ‘All right, give me a dozen of those.’
And you got those?
No. I had to cancel that order too. By then I’d bought Boeing 707s. And I didn’t have any more spare cash. You see, to start this financing program after the war, we needed $500 million. That’s big money. I called Noah Dietrich one day and said, ‘Noah, where the hell am I going to get this $500 million?’
‘What $500 million?’ he asked.
‘Pay attention to your job,’ I said. ‘Get out the files and look and see what the goddamn TWA’s committed itself to.’
He called me back two days later and said, ‘Howard, where are we going to get the $500 million to buy these airplanes?’ That was Noah.
Toolco had a hundred million in cash, profits from the expansion program that we had gone into recently. But that left us four hundred million short. Noah wanted a bond issue, because he wasn’t sure that Toolco’s profits would continue in the same way. The bond issue was meant to be a sort of insurance against the possibility of profits dropping off down at Houston. But he wanted not only a bond issue guaranteed by Hughes Tool, but a bond issue with a conversion clause – meaning that the bondholders could convert at a given point into common stock or preferred stock, whichever the hell it was. This meant in effect that they could take part of Toolco away from me, and I wasn’t having any of that. I said, ‘No dice.’
We worked out some sort of compromise, because we had to come up with the money. I got Fred Brandi of Dillon Read in New York to start the ball rolling – you need a syndicate, you understand, to float an issue of that size. Fred went ahead, and then the details filtered back to me and I realized I could lose my ownership of Toolco this way. That’s what everybody wanted in the long run – they wanted to take Toolco away from me.
I called Fred and said, ‘Forget it. Kill it.’
My father always said, ‘Watch out for partners.’ And what could be worse than being partners with several thousand greedy stockholders? They never care about the company, they just care about the price of the stock.
It was then that Noah Dietrich committed the most irresponsible act of his business life. I was buried up to my neck in the problem of trying to find $400 million, and he went off on a vacation to shoot a goddamn elephant in Africa. He said he was going on safari, but I have a feeling he just wanted to hide out down there. He said I had been so indecisive in the buying of the new jets that he couldn’t stand it, and I wasn’t taking his advice now, and he was going.
Don’t you think it’s true that you had been indecisive?
Because I kept changing my mind? That’s not indecision. That was just an intelligent reaction to changing circumstances. The Convair people promised me they could do certain things and then when it turned out they couldn’t do them, I backed away. Then they came up with a new set of promises, and dropped the ball there too. I knew what I wanted and they couldn’t deliver.
Noah, however, called it indecision, and told me I was being irrational in the matter of raising the money for TWA, and he elected to flee. I did everything I could to stop him, not out of selfish reasons, except insofar as the company was in trouble and I needed Noah. I offered him six months’ vacation if he’d just wait until the troubles were over, but he wanted his three weeks in Tanganyika. I telephoned him at Kennedy Airport in New York – had him paged. I pleaded with him. I got down on my knees – I didn’t literally get down on my knees, because I was on the telephone – but verbally I got down on my knees. I said, ‘Noah, please don’t go. I need you.’
‘Goodbye, Howard,’ he said, ‘I’ll see you in three weeks.’
By the time the great white hunter got back I’d come up with an interim solution. For one thing, I stalled, and while I did that, TWA began to do better, so that it turned out we didn’t need that much cash at all. I squeezed what I could out of Toolco and Equitable Life and the Bank of America and Irving Trust – maybe $30 million. I got it by means of short-term 90-day notes guaranteed by Toolco.
An incident happened there that seemed minor at the time, but if I’d had my thinking cap on I would have realized that it was a portent of the future. These 90-day notes were renewable, and the second or third time I wanted to renew them – this was a $12 million loan from Equitable Life – they balked.
How much did TWA owe by that time?
It wasn’t so much a question of how much TWA owed, it was a question of our long-term commitments for jets. That, at the time, amounted to around $300 million. I wanted the loan to be renewed and the guys up at Equitable got a little stuffy and said, ‘Give us the details on your long-term financing.’ In other words, they wanted to know specifically how I planned to find the rest of the three hundred million. I said, more or less, ‘It’s none of your business. Do you want to lend me the twelve million or don’t you?’
‘Well, sure,’ they said, ‘we know you’re good for it, or at least Toolco’s good for it, but we’d like to have some guarantee for the future, and for our stockholders.’
This was just doubletalk. Then they got around to the point.
You remember that back in 1948 I loaned TWA $10 million which I eventually converted into stock, and that’s how I first got control of the airline. Equitable Life had been mixed up in that, in the sense that they had also loaned TWA $40 million. They were my principal creditor, and one of the conditions they put on my conversion rights was that if TWA defaulted on its payments to Equitable, then my stock would be put into a voting trust controlled by them.