The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [448]
Yet while the local folks were mostly pleased with the deal, investors in Clayton were not. Buffett’s aura worked against him for the first time. Many of the investors knew about Buffetting, even if the Claytons didn’t, and they were in no mood to be Buffetted themselves.
After the deal was announced, shareholders began to besiege the Claytons, pleading, “You’re a great company, the best in the industry; if I’m going to own somebody in the industry, I want to own you; please don’t go away, you’ll get through this and the industry will come bouncing back again,” or threatening, “How dare you sell this company at $12.50 when it’s been as high as $16 and we’ve weathered the storm; the industry is getting ready to come back. How could you even think of selling it that cheap?” Clayton’s large investors thought Buffett was buying at the “bottom of the cycle” for mobile homes and had opportunely timed the deal to catch a bounce. At its peak in 1998, the manufactured-housing industry, using aggressive lending tactics, had shipped 373,000 homes a year. By the end of 2001, that number was down to 193,000 as the economy suffered in the wake of 9/11, and the outlook for 2003 was a measly 130,000. But surely it would turn. Buffett’s history as a savvy trader convinced them that he must have bottom-ticked the price and that they would be suckers if they sold the company now.
That was not what Buffett saw, however. He saw that the mobile-home market had backed itself into a corner by using easy financing terms to make a large percentage of its sales to people who could not afford to buy a home. Therefore the number of homes sold by the industry was not going to bounce.
But the dissidents knew how successful Clayton had been, and, given the numbers, were sure the situation would reverse. They were stewing, talking on the phone far away from Omaha.
Unperturbed by shareholder outrage, Buffett reveled in the thought of his future role as a mobile-home impresario. He kind of liked the trailer-park aspect of the thing. And buying a company from a sharecropper’s son appealed to the man who ate Dilly Bars at Dairy Queen, still lusted over model-train catalogs, owned a company that made prison uniforms, and got a huge kick out of having his picture taken with the Fruit of the Loom guys. The P. T. Barnum in him was already beginning to stir. He could picture it so vividly—a giant mobile home installed in the exhibition space down in the basement of Omaha’s new Qwest Convention Center at the 2004 shareholder meeting, next to the See’s Candies shop maybe, or over by the area where the Justin people were selling boots. The exhibition space kept getting bigger and more dramatic, with more vendors and more merchandise for sale every year. The thought of a whole house, right there in the middle of his shareholder meeting, with a lawn even, and shareholders lined up to get into the house, gaping in awe, delighted him. How many mobile homes could you sell at a shareholder meeting? he wondered. None of the guys at Sun Valley ever sold a mobile home at their shareholder meetings.
Not only that, but Clayton was another company that married his business instincts with his urge to preach. He was going to give the bad actors of the mobile-home business hellfire and damnation. He was going to lead the mobile-home business to financial salvation.
Buffett called in Ian Jacobs, his new project guy. They had a brief conversation: “Ian, here’s a file on Clayton. It gives you all kinds of dope on foreclosures and advances. Now,