DETROIT - Court documents say 10 top executives quit brake supplier VarityKelsey-Hayes last year and joined trim maker Peregrine Inc. because of internal dissent, not because they were enticed by their former CEO.
The 10 executives said in sworn affidavits that their resignations were prompted by problems after last year's merger between Lucas Industries plc and Varity Corp.
Varity is the parent of VarityKelsey-Hayes.
Executives cited several reasons for leaving, including layoff fears, abusive new managers, and lack of confidence in LucasVarity's vision and future.
The executives said they did not leave because of solicitations by Ed Gulda.
Gulda had been their former boss at Kelsey-Hayes. He resigned as CEO of Kelsey-Hayes in September 1995 and formed Peregrine less than a year later.
'I saw a change in the company's mentality on how to run its business, on how to treat its people and on the culture in general,' said Leo Meaney, one of the executives. He now works at Peregrine.
The affidavits were produced in support of a lawsuit that Gulda filed in Michigan. Gulda sued when Kelsey-Hayes prematurely ended his $10,000 per month consulting agreement.
Employee movement, particularly in the automotive industry, has reached new levels in recent years. When an executive or engineer leaves, valuable customer relationships and business often follow. The stakes are rising and so are lawsuits as employers search for ways to recover damages.
LucasVarity is upset by the defections for several reasons:
VarityKelsey-Hayes faces stiff competition in the brake business
The exodus came shortly after LucasVarity CEO Victor Rice cut Kelsey-Hayes' executive ranks by 30 percent because of the merger.
The legal battle has the tone of a grudge match. Rice was referred to as 'the corporate world's version of J.R. Ewing' in the court suit. J.R. Ewing was the central character in the fictional TV show Dallas.
Heading off the clash
Last summer, New York financier Paul Levy tried to head off the clash. Levy is a partner at Joseph Littlejohn & Levy. He helped Gulda buy four plants sold by Delphi Automotive Systems that became Peregrine.
In his affidavit, Levy said that he warned LucasVarity that Gulda might be involved with the new company. Gulda was receiving unsolicited calls from Kelsey-Hayes employees, Levy said. He told Neil Arnold, the chief financial officer at LucasVarity, because 'I did not want Neil to think that we were raiding Varity.'
Levy said Arnold told him not to worry.
But as LucasVarity executives began joining Gulda at Peregrine in September 1996, Arnold evidently started to worry.
According to Levy, Arnold complained that Peregrine was hiring a lot of Varity people, including some of the best.
Levy said he reminded Arnold of Arnold's previous 'don't worry' statements. Levy said Arnold responded that 'he was getting a lot of pressure from Victor Rice.'
In December 1996, LucasVarity stopped paying Gulda the $10,000 monthly fee agreed to under his separation agreement, Gulda's suit said.
After Gulda sued, Rice countersued.
In late March, Rice contended that Gulda was using confidential information and personal contacts to solicit employees from Kelsey-Hayes.
LucasVarity says that if it knew Gulda would hire its executives, it would not have agreed to the consulting agreement.
Gulda claims his contract with LucasVarity contained no prohibition against hiring former employees. He has asked the court to dismiss the counterclaim. Gulda's motion and the affidavits assert that the defecting LucasVarity executives initiated all the contacts to join Gulda.
Richard Schomer, a former Kelsey-Hayes vice-president for replacements parts, said his unhappiness 'was deep rooted.'
The LucasVarity merger put a UK executive from Lucas in charge of Schomer's group. Schomer said the executive was 'abusive, condescending regarding Americans.'
Other former Kelsey-Hayes executives said in their affidavits that the merger stalled their careers.
Mark Slotta, who is now a Peregrine executive vice-president, said in his affidavit that the 'company's lack of strategic planning and the organization's lack of commitment to environmental health and safety (compliance). . . compounded my concerns about its future success.'
In general, employees who had been at Kelsey-Hayes and Varity got the best jobs after the merger, but employees from both companies lost jobs during the down-sizing.
Kristen Bihary, LucasVarity's vice-president for public affairs, said the company does not comment on pending litigation.
Gulda's attorney, Suanne Tiberio Trimmer, a partner with the Michigan law firm Dawda, Mann, Mulcahy & Sadler pc, also declined to comment.
Hearings in the case are continuing.