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Inside U-Haul's Rollercoaster Ride From Nastiest Family Feud To Market Dominance

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This story appears in the February 28, 2016 issue of Forbes. Subscribe

By Alex Morrell and Luisa Kroll

Dressed in black pants and a black U-Haul shirt, Joe Shoen, 66, is sitting in a conference room in the middle of a meeting. His cellphone buzzes. Brenda, a customer moving from Michigan to Florida, is furious about a U-Haul phone operator who hung up on her. Shoen scribbles some notes and apologizes. He directs her to the location finder on uhaul.com, where she can look up climate-controlled self-storage locations. Later he calls Mike Kinealy, vice president of sales and customer service, and tells him to follow up. Using Brenda's phone number, Kinealy and the local manager identify and reach out to the employee to discuss her actions.

The longtime CEO of U-Haul's parent company, Amerco, Shoen has personally responded to such calls--on average three a day, but sometimes dozens in hours--since he gave out his cellphone number on the TV show Inside Edition in February 2008. He did so in response to allegations about the poor safety conditions of U-Haul trailers: There were dozens of sway-related accidents in a decade . Shoen believed they could have been avoided if U-Haul employees had properly informed customers. "People can't get this organization to behave. I can," Shoen said at the time.

Most CEOs would have had their assistant set up another line minutes after the show aired. Not Shoen. Not only did he not change his number, but eight years later he still claims to respond to every call--although sometimes via e-mail or text--and now insists that all U-Haul general managers post their cellphone numbers in their stores and on the perimeter gates and print them on their business cards. (Don't believe us? Call him at 602-390-6525.) He credits the direct line with such innovations as a box designed for flat-screen televisions, 24/7 access to U-Haul's storage units and printed instructions for customers on how to safely connect and disconnect trailers.

Frankly, a few calls from enraged customers in the middle of the night are nothing compared with what Shoen has already endured for this company. His family and U-Haul--which his father, Leonard Samuel (a.k.a. "L.S."), and mother, Anna Mary, founded in 1945--have been at the center of one of the messiest family feuds in American history. Having lost faith in his father's ability to run the business, Joe wrested away control of Amerco in 1986, unleashing a torrent of litigation and reputational warfare; L.S. later accused Joe and his younger brother Mark of being involved in the murder of their sister-in-law. L.S. told FORBES in 1994 that Joe was mentally ill. Others insisted that L.S. was manic-depressive; he killed himself in 1999. There were allegations of financial shenanigans, which were followed by a bankruptcy filing. U-Haul only recently escaped from the quagmire of family infighting, settling the last of the litigation in 2012.

All of the distractions should have driven U-Haul into the ground. And they nearly did, hindering the company's ability to borrow money, attract talent and forge partnerships. But Joe held firmly on to control and kept U-Haul alive by concentrating on the mundane, day-to-day details of its core self-moving business.

"[Joe] manages in an interesting way. I would characterize that as 'Keep your head down and focus on the customer.' We're in the world of celebrity CEOs and celebrity executives, and Joe's not out there pounding his chest," says Amy Hillman, a dean and professor of strategy at Arizona State University's business school , who has written a case study on the company.

Quite the opposite. Still scarred by the dozens of TV shows, books and newspaper articles chronicling his family's murder saga, Shoen wants almost no attention. He rarely speaks to the press. He is also not receptive to Wall Street, usually refusing to speak to investors or analysts. The company participates in just one investment conference a year, and only two analysts cover the over $6 billion (market cap) firm.

But it's an extraordinary story. Thanks to Joe's unwavering focus, U-Haul has steadily expanded its dominance in the self-moving business. As of fiscal year 2015 (calculated from March to March) it had 135,000 trucks and 107,000 trailers on the road, 17,000 more than the year prior. Rival Avis Budget last reported 22,000 truck rentals in 2014, down 5,000 from the previous two years. Penske rents out approximately 15,000 trucks on a local or one-way basis, plus another 25,000 commercial trucks on a local basis.

Since the family finally settled the last of its lawsuits in August 2012, Amerco, which also has a growing self-storage business and a small insurance outfit, has achieved record sales of $3.1 billion (the majority of it, some $2.2 billion, from its core move-it-yourself business) and earnings of $357 million, up 23% and 74%, respectively, since FY 2012. For the first nine months of FY 2016 revenues increased by 6.6%, a bit lower than its five-year average of 9%, while net earnings have risen 26%. Amerco is in the top 5% of Nasdaq's best-performing stocks, with its shares up 255% in value since the settlement, to a recent $333--despite the fact that they have stumbled 24% from their late-November peak.

"A weight had been lifted off everyone in the organization. It was an unbelievable relief," recalls Shoen, who, thanks to his 17.6% stake and the stock's performance, now has a fortune of nearly $1.2 billion. Still Shoen is never at ease. "To me it seems [business] is more difficult every morning," he says. "As we grow we have to continue to be sharp. We have to continue to be careful."

U-Haul was conceived by L.S. Shoen and his wife, Anna Mary. The two met in Portland, Ore. in 1943. L.S. was studying to become a medical doctor at the University of Oregon while Anna Mary Carty was a student at nearby Marylhurst University. Then, at age 27, L.S., who had earned the nickname "Slick" in med school for hatching moneymaking plans, got kicked out a year shy of graduation for covering for an absent friend during roll call.

No longer in school, he was quickly eligible for action in World War II. Before heading off to boot camp, he married Anna Mary. But he never made it onto the battlefields because of his own fight against disease. He caught scarlet fever while training in Idaho, then rheumatic fever while in Seattle. The Navy eventually sent him to Corona, Calif. (just east of Anaheim) to recover until he was discharged in 1945.

By then the couple had a 4-month-old son, Sam, and, according to company lore, they tried to rent a trailer to move their stuff back to Portland but had no luck . On the long drive home the pair dreamed up the name U-Haul and formulated a rough plan. The couple moved onto Anna Mary's family ranch an hour from Portland and began pouring their life savings of about $5,000 (around $65,000 in today's dollars) into launching the company. L.S. originally purchased used trailers, but they broke down often and repairs were expensive. So he taught himself how to weld and began building his own. Then he traveled around, persuading gas station owners to let them rent the trailers from their property in return for commissions: 25% for one-way rentals and 40% for local ones.

The postwar baby boom was an ideal time for the business. Economic prosperity--and the birth of the Eisenhower Interstate Highway System--sparked the growth of the suburbs and unparalleled migration by American families. U-Haul's nationwide, one-way trailer rentals became an indispensable tool, and "U-Haul" entered the lexicon in the same way Xerox would (later) for photocopies and Google would (much later) for search.

It was generally smooth driving until 1957, when Anna Mary, who had a congenital heart defect, died at age 34. At the time the couple had six children under the age of 13, and each child inherited a piece of their mother's 50% stake in the company, which by then had $6 million in sales (roughly $50 million in 2015 dollars) from 22,000 trailers. Ultimately her death not only shifted ownership to the kids but also shattered the family.

A year later L.S., who was often on the road, married Suzanne Gilbaugh, the much younger daughter of his neighbors, and sent his two eldest sons, Sam and Mike, then 12 and 10, to boarding school in California right after the wedding. The next eldest, Joe, 8, and Mark, 6, stayed at home in Oregon, where they formed a lasting bond. Over the course of that marriage L.S. had five more children and moved the family to Palm Springs, Calif. and then to Phoenix, where U-Haul remains headquartered. The couple divorced after 20 years, and L.S. married four more times, twice to the same woman. Shoen gifted shares to all his children over the years and owned none at the time of his suicide.

The wheels started to fall off the business in the 1970s during the oil crisis. Most of U-Haul's dealers were set up in partnership with local gas stations, which started going under at an alarming clip when they ran out of gas to sell. Many of those that survived shifted to self-service and no longer had the staff to rent U-Haul's trucks and trailers. In response L.S. bought up nearly 1,000 buildings in 1975, many of them cast-off Chrysler dealerships, and began opening company-owned locations. It upended U-Haul's business model and added lots of costs, both in property purchases and in hiring full-time employees.

It was also the decade that several of Shoen's children joined U-Haul as executives; many had worked for the company part-time over the years and were pressured by their father to join the ranks. Joe came on board in 1973, immediately after graduating from Harvard Business School, where he'd written a paper on the economics of the self-storage business. Around the same time Joe's older brother Sam quit his medical career to come help, and Michael, a lawyer, gave up his practice to join U-Haul.

Tensions mounted as the brothers jockeyed for position and disagreed about the best direction for the business. Doc Sam, as he was nicknamed (even after picking up a Harvard M.B.A.), largely supported L.S.' efforts and was seen as Dad's top choice for successor.

Joe, on the other hand, was fairly obstinate that the company was not moving in the right way. He wanted U-Haul to get back to the basics of renting trucks and trailers. He also didn't like working in the shadow of his big brother. So he quit in 1978, went to law school at Arizona State and one year later opened Space Age Auto Paint, selling paint for cars, boats and airplanes. (He still owns the business today; U-Haul is a customer.) With his brother Mark (part of the faction who stayed at home in Oregon) he also opened a printing outfit next door called Form Builders Inc. (F.B.I.), whose main customer was U-Haul.

While Mark and Joe tended to their ventures, L.S. began casting about for new revenue streams, setting up U-Haul centers where people could rent all sorts of items--from motor homes and floor sanders to Jet Skis and party supplies like dance floors, awnings and punch bowls. As U-Haul lost focus, its finances unraveled; net profits sank to $9.2 million in 1986 and $2.2 million a year later, down from $42 million two years earlier, and debt ballooned to nearly $600 million. Thousands of employees lost their jobs.

Worried that his father was wrecking the company, Joe led a coup in 1986, forcing L.S., then 70, into retirement. His father conceded the chairman's post to Joe as long as Doc Sam, L.S.' longtime ally, stayed on as CEO. L.S. even threw himself a retirement party.

But things turned sour quickly, and Sam quit in less than a year, unable to get along with Joe. Then Sam and L.S. reached out to Bear Stearns to explore options that would give the shareholders some liquidity. At that point they had just enough votes to carry out their plan. Joe was furious, viewing their move as a hostile takeover. He countered, persuading the board to issue 8,099 shares on favorable terms to five key executives, tilting voting power to his faction. In response Sam and L.S. took U-Haul to court in 1988 to challenge the maneuver and seek damages. Joe retaliated by canceling his father's lifetime employment agreement.

Then it got much worse. Sam's wife, Eva, was found murdered in their Telluride, Colo. home on Aug. 6, 1990, with a gunshot wound to her back. L.S. and Sam were convinced that Sam was the intended target--and that it was a hit job orchestrated by Joe and Mark.

Certain of his sons' involvement, L.S., with Sam, offered a $250,000 reward to find the killers and pushed to have the saga aired on Unsolved Mysteries, which it was in December 1992. While L.S. was trying to prove his sons were killers, the show actually helped authorities find the real culprit, a serial-rapist ex-con named Frank Marquis, who had confessed to his own brother-in-law. In exchange for providing evidence that he had not been hired to kill Eva, Marquis was given a plea deal in 1994 to serve 24 years for reckless manslaughter and second-degree burglary. He was paroled from the Penitentiary of New Mexico in Santa Fe in 2011.

Despite the conviction, Sam still doesn't believe Marquis was the culprit, or at least the only one: "I don't believe Marquis did it. And if he did, he certainly wasn't alone." Joe and Mark insist they were not involved in any way. The sheriff on the case, Bill Masters, also dismisses Sam's theory. "There's no doubt in my mind that Frank Marquis murdered her and was acting alone," Masters says.

Joe may have had nothing to do with the murder, but he was found guilty of breaking another law. In 1994 a jury found that, by issuing new shares, the board of directors breached their fiduciary duty by preventing the plaintiffs from gaining control. It ordered them to pay nearly $1.5 billion . On top of that, Joe had to pay an additional $70 million in punitive damages.

"We were a tad surprised at that [verdict]," recalls Joe. The next year a judge reduced the damages to $462 million overall (and $7 million for Joe personally) but determined that it had to be paid in cash.

Coming up with that much cash seemed an impossible task. Five board members who were held personally liable filed for bankruptcy (a sixth, Joe's youngest full brother, Paul, who was no longer on the board, worked out a separate agreement). Amerco, which had indemnified the directors, was now responsible. Since its assets were already being used as collateral for a general line of credit to run the business, it was forced to sell millions of dollars' worth of assets.

Enter Joe's closest sibling, Mark, who joined Amerco's board in 1990, after the coup, and therefore couldn't be held liable. Mark bought a bunch of the assets U-Haul was forced to sell. He then borrowed against them and immediately remitted the cash to the company. Between 1994 and 2002 Amerco sold 230 self-storage properties for $600 million in cash and debt to a special-purpose entity called SAC Holdings, of which Mark is the main owner. The move gave it cash and also let it collect fees for managing the properties. Today he owns more than 400 self-storage properties that U-Haul still manages. These assets are worth an estimated $3.3 billion, more than double the value of his 19.5% stake in U-Haul, which itself is worth $1.2 billion.

The financial maneuverings were clever, but were they legal? In the wake of Enron, PricewaterhouseCoopers recommended that it consolidate SAC on its financial statements going back to 1995. That pushed up its debt levels to $900 million, made it difficult to renew credit lines and put it in danger of losing its Nasdaq listing. In the middle of it all brother Paul, the youngest of L.S. and first wife Anna Mary's six children, sued, alleging inappropriate dealings with SAC, including the transfer of $200 million. U-Haul filed Chapter 11 bankruptcy in June 2003 and emerged the next year. Meanwhile, the legal case dragged on. It was dismissed with prejudice in 2012, with Paul and the others forced to sell their Amerco shares and forbidden by the Nevada court from holding shares for 20 years .

It's hard to imagine running a business amid all this turmoil, but that's just what Joe had to do. So he retreated into the work. From 1987 to 1996 he jettisoned noncore businesses and spent $2.8 billion in capital expenditures, buying 80,000 new trucks and lowering the fleet's average age from 11 years to 5.

Even at the rockiest times Joe kept his ear to the road. As a young teen he would climb aboard his dad's single-prop Cessna 182 to accompany him to different locations. He later took his own kids, Sam and Stuart, now both executives at U-Haul, on similar trips. "If not, we'd have had an absentee dad," says Stuart, executive vice president of U-Haul International. "Traveling with my dad taught me everything I learned. It really is his passion."

These days Shoen spends roughly every other week visiting some of U-Haul's dealers. He typically starts early on a Monday morning and works until 9 most nights, visiting as many as 17 states in a week. He flies in the company plane to get to more locations more quickly, but the frills stop there. He has a policy of two people per motel room and insists they stay at inexpensive chains like Red Roof Inn and La Quinta. Room service is verboten. He eats most of his meals at McDonald's. Joe's cheapness is the stuff of company lore. On one trip he and four of his employees showed up at a motel. Despite the fact they'd booked three rooms with two double beds, there were only five rooms, with one king-size bed apiece. Even though it was after midnight, Joe insisted on finding a different motel.

"He's boots on the ground. That's how he knows what's going on. He's always in our field operations, learning, listening, watching, doing," says Bob Wesson, a longtime U-Haul exec . At each location Shoen prints out a P&L statement and asks the manager what Shoen can do to make the business better. He jots down ideas on a pad, then snaps a photo of his notes with his phone to text to his assistant, who then often turns it into a memo to the employees. He also spends a lot of time scouting for self-storage locations, a growing part of the business, generating $211 million in sales in 2015. U-Haul not only manages 481 of them for SAC Holdings and others (owned mostly by Mark) but also owns 799 in all 50 states. Most of the facilities are conversions or adaptations of landmark buildings like the Wonder Bread bakery in Jamaica, Queens.

U-Haul is a sprawling operation to keep tabs on. It now operates and manages 1,600 locations, but another 18,200 are independent dealers, run out of self-storage centers, gas stations, convenience stores, auto repair shops and even lumber stores. Thanks to a comprehensive plan that Shoen put into place to attract more small businesses, 2,700 new partners have signed on since 2012. Not to be confused with franchisees, these dealers simply let U-Haul park its trailers and trucks in their parking lots and rent the vehicles out for, on average, a 21% commission. It's a throwback to L.S.' old arrangement with gas station owners in the 1950s. To service these dealers and their customers U-Haul now has close to 15,000 vendors, including towing companies and mechanics, throughout North America that can be called if a customer's rental breaks down. That is a huge jump from 2,500 in 2012. The number of staffers, both full- and part-time, increased by 7,700 in that time.

At this point it's not just about beating rivals. "The competitive moat enjoyed by this company is significant and has myriad competitive advantages it enjoys," says Jim Barrett, an analyst for CL King & Associates who has followed the company for nine years. "It's an example of a company that focuses on one thing and over the decades has gotten very good at it. Its real competitor is the consumer who borrows the van next door and moves themselves."

Shoen has a few plans to woo these customers, too. In 2010 the company bought Collegeboxes, which was founded at Duke University (it's now headquartered in Phoenix) and specializes in shipping students' belongings to their dorms. It also set up movinghelp.com, an online marketplace that connects customers to laborers who can help them move, and created a U-Box program, in which the company drops off and picks up storage containers for customers who don't want to rent and drive their own trailers. (It initially called them pods but stopped doing so after PODS Enterprises sued for trademark infringement and a jury awarded PODS $64 million.)

U-Haul is well positioned to grow for decades to come, but it's come at a huge human cost. Joe, for instance, speaks to only two of his siblings. But he has no interest in mending fences and expresses no regrets at how things unfolded. "I don't think that the break in the family caused [U-Haul's] success. I think it could have caused the failure of U-Haul," says Joe, who is remarried and has three younger children. "So of course I would rather that we would not have discord in the family, but the result we have achieved is much more in keeping with the ethics and values that my father attempted to pass on."

THE LONG WINDING ROAD: SHOEN FAMILY'S JOURNEY

Feb. 29, 1916

L.S. Shoen is born in Minnesota; his father, Sam, was a former boxer and semiprofessional baseball player.

1937

L.S. enrolls at Oregon State. He gives haircuts in his dorm room to earn money. With a friend, L.S. opens a barbershop near campus, which leads to a chain of shops. He pays for college and eventually matriculates to the University of Oregon's School of Medicine. The attack on Pearl Harbor shuts down the business as most of his barbers enlist. Not L.S., who was in the Navy's V-12 program, which permitted men to finish schooling before becoming Naval officers.

1944

Soon after being kicked out of medical school and just before joining the Navy, L.S. marries Anna Mary Carty, his sister's college roommate, whom he started dating a year earlier. Anna Mary grew up on a prosperous ranch in Ridgefield, Wash. Her mother had served as Oregon's first female postmistress. Her father, Bill, was a farmer and state representative.

1945

L.S.' military stint is cut short after he contracts scarlet and then rheumatic fevers. While recuperating in California, L.S. has the idea for one-way trailers. The couple soon moves to his wife's family ranch almost an hour outside Portland, Ore., where they found U-Haul.

1956

U-Haul is on the move, overhauling the look of its trucks and trailers and painting them orange and white. The company sets up five regions with their own directors and introduces a roadside-assistance service. The next year Anna Mary dies at age 34, leaving behind six children under age 13, all of whom inherit a piece of the company. 1969 Amerco is incorporated in Nevada as a holding company for U-Haul businesses. L.S. acquires Oxford Life Insurance to provide cost-effective health and life insurance to employees. Four years later U-Haul starts selling liability insurance to its customers.

1973

The oil crisis strikes, forcing thousands of gas stations to close and costing U-Haul a lot of business. L.S.' son Joe, a recently minted Harvard M.B.A., joins full-time. Around this time father asks Joe's older brothers, Sam and Michael, to quit their jobs (one is a doctor, the other a lawyer) and come help. In 1974 it opens its first U-Haul Moving Center and enters the storage business.

1981

Joe opens Space Age Auto Paint. He still owns the business today, which sold $300,000 worth of paint to U-Haul last fiscal year

1985

L.S., apparently feeling his children were not taking enough interest in the company, kicks seven of them off Amerco's board, despite the fact that the kids hold most of the voting power. In November 1986, as U-Haul's financials worsen, a number of siblings band together and use their shares to force L.S. into retirement. "He had to retire and be run off simultaneously," Joe told FORBES in 1987.

Aug. 6, 1990

Sam Shoen's wife, Eva, is murdered. Her young daughter, Bente, finds her mother's body at the top of the stairs at their home in the tony ski town of Telluride, Colo. She, her brother and a friend were all in the house at the time of the murder. So, too, were the family's dogs. Sam was in Phoenix on a business trip. L.S. and Sam offer a $250,000 reward and, convinced that his sons Joe and Mark had a role in the killing, gets the tabloid TV show Unsolved Mysteries to feature it. The coverage leads to the arrest and conviction. of Frank Marquis, an ex-con and serial rapist. Joe and Mark sue for defamation, but the case is eventually dismissed.

1994

Amerco, U-Haul's parent company, whose sales topped $1 billion for the first time the previous year, goes public on Nasdaq at $15.83 a share on a split-adjusted basis. The IPO comes one month after a jury rules that U-Haul and its board owe Sam and other plaintiffs $1.47 billion. A judge later cuts it down to $462 million.

2002

Amerco's longtime auditor PwC tells the company to restate its financials, pushing $900 million of debt onto the balance sheet. It defaults on $100 million. Brother Paul sues its off-the-books entity SAC Holdings, alleging that his brothers Joe, James and Mark binged on Amerco's assets, using the same financial instrument infamously used by Enron. In June 2003 U-Haul files for bankruptcy. It emerges nine months later.

Feb. 27, 2008

Joe Shoen goes on Inside Edition to defend the company's role in dozens of sway-related accidents over a decade involving its single-trailer model. The company eventually pays millions in settlements.

2010

Seeing an opportunity to reach younger customers, U-Haul buys Collegeboxes, which had its origins as a Duke University class project. Collegeboxes says it's now the largest student summer storage and shipping provider in the country, delivering boxes to dozens of schools and storing belongings over summer breaks.

Source: A Noble Function: How U-Haul Moved America.