Why Colt Can’t Shoot Straight

Courtesy of BusinessWeek. By Paul M. Barrett

The Connecticut River region has supplied the U.S. with firearms since before it was a nation, and some of the best-known names in the industry remain in what’s known as Gun Valley. Smith & Wesson (SWHC) operates from a fortress-like building in Springfield, Mass. Sturm Ruger (RGR) has its headquarters in Southport, Conn. Colt, the most famous of all the New England small-arms manufacturers, still makes handguns and rifles at a 22-acre facility in West Hartford. A giant blue sign with the company’s familiar “rampant Colt” rearing horse insignia marks the entrance.

Decorating the lobby of the Colt administrative building is a series of framed documents testifying to the gunmaker’s influence. Here’s a record of William F. “Buffalo Bill” Cody’s purchase of a Colt Peacemaker on Aug. 17, 1883. George S. Patton Jr., just beginning his rise up U.S. Army ranks, bought a .38 revolver on May 18, 1912. Generations of American officers carried versions of the Colt .45 pistol into battle in World War I, World War II, Korea, and Vietnam—an extraordinary span of service for a weapon introduced during the American occupation of the Philippines. Later, Colt made the M16 rifles GIs took into the dense jungles of Vietnam and the compact, swift-firing M4s that have accompanied U.S. soldiers to the deserts of Iraq and Afghanistan. John Wayne, Clint Eastwood, and Bruce Willis have all brandished Colts on the big screen, as did Captain John Miller (Tom Hanks) in Saving Private Ryan. No manufacturer has put more firearms in more American hands over a longer period of time.

In the Colt factory, a short walk from the reception area, rows of hulking machines, some computer-controlled, others surprisingly antiquated, hum with activity. The chemical scent of lubricants hangs in the air. Mike Magouirk, the company’s chief operating officer, points out a pair of women in safety glasses assembling pocket-size .380 Mustang pistols. “Reintroducing Colt commercial handguns is a big priority,” he says. “These models haven’t been as available as we wish they had been during the past few years when demand was so high.” Another assembly line produces the latest offspring of John Browning’s 1911 design—a .45 “close quarter battle pistol” for the U.S. Marine Corps. “This is a point of pride, because it’s our franchise from way back,” says Magouirk, an ex-marine. Sales of the AR15, a civilian semiautomatic version of the Colt military rifle, have been soft in recent months, he says, even though it has won over former critics of the company. Magouirk’s excited to talk about the latest iteration of the M4. He points out some crates marked “UAE” that fill the loading dock: rifles headed for the United Arab Emirates. “The M4 is the envy of the world,” he says.

He’s not exaggerating. In addition to forces in the U.S. and U.A.E., militaries in Canada, Malaysia, and scores of other countries use versions of the rifle. And yet despite high regard for the M4 and a growing consensus that the company has put some of its quality-control problems behind it, Colt, owner of one of the best-known brands in firearms—or any industry—finds itself again on the edge of financial disaster. It showed a net loss on declining sales for the first quarter of 2014, and its long-term bonds merit junk ratings from Standard & Poor’s (MHFI) and Moody’s(MCO). “Colt’s very weak credit measures, if they persist, could make refinancing difficult for the company when its bonds mature in 2017,” S&P said in an April 1 analysis.

For historians, collectors, and even some investors, it’s a sorry kind of déjà vu, as Colt has been haunted by commercial crisis for many of its 178 years. In particular, the past decade has been dominated by some dubious financial engineering and accumulation of a daunting debt load. Adding insult to injury, lawsuits filed by two former senior Colt executives, scheduled for trial in September, threaten to air allegations of a front office tainted by racism and homophobia.

“The pattern at Colt has been consistent for decades, dysfunction and more dysfunction,” says Cameron Hopkins, an industry consultant and former editor-in-chief of Firearm Marketing Group, publisher of the magazines American Handgunner and GUNS. Colt “always seems to be on the brink,” agrees Richard Feldman, president of the Independent Firearm Owners Association, an advocacy group. “It’s like some kind of weird curse.”

Handgun pioneer Samuel Colt got off to an unpromising start. Born in Hartford in 1814, the mechanically inclined young man returned from a stint as a seaman’s apprentice inspired by the captain’s wheel, or so the story goes, to devise an improved sidearm. The user of Colt’s repeating revolver did not have to manually rotate the ammunition cylinder around the barrel. Pulling back the hammer also turned the cylinder.

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