Harry Kletter has launched, bought, sold, and operated more than a dozen businesses in scrap and related industries. Before retiring, though, this 80-year-old still has a few more ambitious plans.
BY JIM FOWLER
In Austrian German, kletter means “climb.” That word makes an apt name for Harry Kletter, chairman and CEO of Industrial Services of America (Louis-ville, Ky.), because he has climbed high in his decades-long career in the recycling business. He has faced occasional slips along the way, but his enthusiasm for the industry is undaunted.
Now 80, Kletter is planning his retirement from ISA, the $100 million corporation he built from scratch. But before he goes, he wants to realize one last vision: the creation of a model scrapyard for the industry, one designed to be replicated in cities throughout the country.
A Colorful Scrap Childhood
The Kletter family story is the classic immigrant scrap saga. Harry’s father, Max Kletter, emigrated from Austria in 1912, ultimately settling in Detroit. He married the girl who lived down the street, Russian immigrant May Soverinsky, in 1922, and they welcomed their first son Sam in 1923 and second son Harry in 1927.
Max Kletter first supported his family with a small window-cleaning business, but it didn’t survive the Depression. In 1934, Max began working for a real estate company to maintain foreclosed homes. Harry remembers working with his father and older brother, taking care of the empty homes—cleaning them, keeping the furnaces going, and cutting the grass. The Kletters also cleaned out the houses’ basements, sorting the material in their garage. “Our father let us have the bottles to cash in for 2 cents each and the comic books, which we sold for spending money,” Harry says.
After that contract ended, Max Kletter started buying rags, paper, and metals from apartment caretakers. “We had a hanging scale that we’d tie to the caretaker’s ceiling,” Harry recalls. “My job was to write down the item and weight because my father couldn’t write in English.”
The Kletters sold their scrap to a cousin in the junk business until they had a “family quarrel” over prices. At the time, Detroit’s notorious Purple Gang provided “protection” for junk operations in the city, dictating the buying and selling territories. When the Kletters began selling their material to a shop that offered better prices, members of the Purple Gang tried to intervene. “Not to be intimidated, my father chased them down the street,” Harry says. “He’d left the emperor in Austria and wasn’t going to put up with [that behavior] in the United States. It was an important lesson.”
In 1937, the Kletter family jumped at the opportunity to have its own small junk shop, which expanded and moved twice in just a few years. During this period, Harry and older brother Sam attended school and worked at the company in the afternoon.
After World War II broke out, the growing company installed an upstroke baler to process scrap paper collected through paper drives. The business, which at that point operated out of a two-story, 5,000-square-foot building on a half-acre lot, was handling rags, newspaper, corrugated, nonferrous metals, and iron, Harry recalls. “Those were exciting times for me,” he says. “I was 15, I had a new car and unlimited gas because we were in the junk business, which was important to the war effort.
I was a big shot in school and had girlfriends because I had a car. Then, at 16, I got a special license to drive a tractor-trailer so I could haul paper.”
In 1945, after Harry graduated from high school, he planned to follow his brother Sam into military service. Sam had joined the Marines two years earlier, but he advised Harry to join the Navy, “so I’d always have a bed—because he often didn’t while fighting in the Pacific,” Harry says. The Navy trained him as an aerial gunner and machinist, discharging him in 1946 after he had served 18 months. Harry headed to technical school, which expanded on the mechanical knowledge he had gained in his Navy training. “I’ve always been equipment-oriented, and that early opportunity to learn more about mechanics continues to benefit me in the scrap business,” he says.
Taking advantage of the G.I. Bill, he enrolled at the University of Michigan (Ann Arbor), but he left after one year because the school wouldn’t let him have a car on campus, he says. He transferred to Wayne State University in Detroit, where he could continue his studies and work in the family business. “I always had money in my pocket and realized I was entrepreneurial,” Harry says, “and I was learning about diversification.”
Going Into Business
After the war, the scrap paper market cooled off, so the Kletters sought other promising recycling niches. The rag business offered four good years in the late 1940s, then Harry, at age 22, decided to launch his own company, Star Salvaging, to work with what he calls “oddball items” such as scrap auto parts and X-ray film. As he visited suppliers around Detroit, he contemplated buying his own scrapyard. The first step, he decided, was to get more experience in the industry.
Kletter left Detroit to work for Abe Byer at American Compressed Steel Corp. in Cincinnati. Byer encouraged Kletter to broaden his knowledge by visiting other scrapyards in the area. The yard owners he visited—Joe Mansbach of Mansbach Metal (Ashland, Ky.) and Irving Fell of Fell Iron & Metal (Bloomington, Ind.)—encouraged his entrepreneurial instincts. (Fell later became his father-in-law as well.)
After six months at American Compressed Steel, Harry returned to Detroit and started looking for his own opportunity. One day, he saw a for-rent ad for a little yard in New Albany, Ind., just across the Ohio River from Louisville, Ky. He contacted Sam Rosenberg, an acquaintance whom he had met in the Junior Chamber of Commerce and whose family had a small junkyard behind its house in Coldwater, Mich. With $10,000 of his own money in hand, Harry asked Rosenberg to partner with him in renting the scrap facility—and to bring the crane from his family’s yard. “We made a deal and took off for our new business with nothing but homemade equipment, a chain-driven Mack truck, and Sam’s crane,” Harry recalls.
The new company quickly found its niche buying military scrap in the Louisville area. That specialty started by chance when Harry ran across a retired war plane—a Grumman F6F Hellcat—in a city park and bought it for scrap. He recycled the plane’s aluminum body but set the engine aside because he didn’t know what to do with it. When a local airport worker asked to buy the engine, Harry made him a deal: He could have the engine if he would “teach Sam and me to fly.” This turned out to be a valuable skill, he says, because it expanded their range in their search for military surplus, including “the big stuff—tanks and anti-aircraft guns.”
In 1953, Harry and Sam moved across the river to Louisville and named their company Tri-City Scrap Baling. Two years later, with a surplus lugger truck, the men entered the commercial and industrial waste-hauling business with Tri-City Trash and Sanitation. They further diversified into, among other things, portable toilets, rental Yale forklifts, and—later—a Yale distributorship. The partners also bought 15 acres in Louisville that they would use to start a new scrap operation in 1957.
Around 1960, Harry found what he considered the perfect heavy-duty waste compactor for his large-volume accounts. He describes the machine as “a baler laid down on the ground that compresses the waste into a container.” He had five of the units manufactured. At a trade show in Detroit, the compactor drew the attention of a plant engineer for GM’s Ternstedt division. Harry installed a compactor at GM’s Detroit plant, and the company was so pleased with the machine’s performance that it hired Tri-City to manage all the plant’s waste. Thanks to that contract, Tri-City “took off and became very large in the waste business because automotive and industrial plants came to us for the waste compactor,” Harry says. To reflect the company’s larger scope and broader services, the partners changed its name to Industrial Services of America.
Throughout the 1960s Harry continued to launch or purchase new companies, including Tri-Pak, which manufactured a complete line of waste handling equipment, and several waste-hauling companies. To raise the capital he needed to support this growth, Harry decided to take his company public. “I started acting as if we were public,” he says, “and in 1969 we actually went public—[we were] the first public company in the waste industry” and possibly the only large company of its time to offer both scrap and waste services.
Bumps in the Road
By 1973, Harry, then 46, found himself frustrated that his company’s stock wasn’t climbing like that of other publicly traded waste firms, such as Waste Management and Browning-Ferris Industries (which, Harry notes, went public after ISA). “I wasn’t versed in acquisitions, didn’t know how to roll-up other companies, and didn’t understand how the public market worked,” he says. “I had second thoughts about my strategy and thought maybe I should merge with one of those companies.” But the other companies didn’t like Harry’s concept of total management of scrap, waste, and equipment manufacturing. “They didn’t want to be in the scrap business and, frankly, they didn’t like scrap people,” he asserts. Eventually he did find a buyer, Boston-based SCA. But just three years later, in 1976, Harry saw “trouble brewing,” so he bought back everything but the waste companies, which SCA insisted on retaining. Subsequently, in the late 1970s, SCA went bankrupt.
With his scrap processing assets and four equipment manufacturing plants, Harry started afresh. This time he saw growth opportunities in scrap. He steadily modernized his scrap operation, “recognizing that the commodity business, the business I’ve always believed in, was going to be the wave of the future.” By 1980 he had built up “a good-sized company,” but interest rates that skyrocketed to 22 percent forced many of his customers out of business—“and we ultimately joined them,” he says. From 1982 to 1984, Harry liquidated his scrapyard and sold a portion of its 15-acre site on Grade Lane in Louisville. When the bankruptcy dust settled, he had only the skeletal remains of a scrapyard and a paper processing facility.
So there he was—“adventurous, a little wild, bankrupt” and in search of a new opportunity. He looked West, to a paper sorting plant in Bataan, Philippines, that had sought his expertise. When Harry visited the operation, he was greeted by “a bunch of guys with machine guns—a revolution was going on,” he recalls. At the huge facility, he found workers sorting bales of paper from the U.S. West Coast and shipping the material on to China. Finding the business intriguing and promising, Harry invested some money from his remaining assets—the forklift franchise and real estate holdings—but he ultimately had to abandon the deal due to the revolution. “I left the Philippines and took my loss,” he says. “I learned a lot but lost $200,000.”
Back at the starting line again, the intrepid Harry bought a corporate shell in 1985 and relaunched Industrial Services of America. He merged Computerized Waste Systems, a company he bought in 1980, into the new corporation and concentrated on getting new waste management accounts at large corporations.
He was processing scrap paper, running the forklift franchise, and “just piddling along with the scrapyard that had no equipment,” he says, when scrap paper prices jumped to $200 a ton, giving ISA a cash infusion. “We had a million-dollar profit in less than a year,” he says, “and we used that money to buy back the Grade Lane property we had lost and invest in new equipment.” ISA’s stock, previously 10 cents a share, rose to $14 a share in 1996, enabling Harry to settle his bankruptcy debt. “It took 10 years to pay it off,” he says. By 1997 he had bought everything back and was expanding the scrapyard. Today ISA has 50 acres at the Grade Lane location as well as sites in Seymour and New Albany, Ind.
Though Harry remains bullish about the future of the scrap industry, he sees some big changes ahead and a few challenges. For one, he expects steel mills increasingly to buy scrapyards to “ensure scrap for their furnaces,” he says. Scrap demand will remain high, he predicts, further squeezing scrap supplies, which “means that smaller companies may ultimately need to consolidate or sell out, similar to what happened in the waste industry.” Along with the scrap shortage, the industry will face a labor shortage, especially in its management ranks. “Where are companies going to get the people to manage their scrapyards?” Harry asks. “We need to bring in young people and train them in the business.”
Still Climbing
After decades in the recycling business, Harry says candidly, “I’m 80 and I’m ready to get out of here.” Before bowing out, however, he has two final projects to complete.
First, he is finalizing succession plans for the company. He recently hired Brian Donaghy from Northern Ireland as president and COO, and he’s seeking a chairman and CEO, or perhaps a company or network of private companies with which to do a reverse takeover. In that process, a corporate entity acquires a private company and then reverses control to the acquired company.
Second, Harry wants to realize his dream of creating a “model scrapyard.” Part of this concept is a machine that he calls a rotary shear. The Shredder Co. (Canutillo, Texas) is designing the 3,500-hp unit, modeled after a horizontal machine Harry saw in Europe in the 1960s that was used for downsizing garbage and ripping up construction and demolition debris. “I don’t want a shredder,” he says, “I want a machine that shears horizontally—a rotary shear.” He’s designing the machine’s mill and grates to size material based on the processor’s needs, he says. “We want a piece of scrap bigger than a shred nugget, so the hammers will be bigger, and there will be bigger openings in the grates. My end products will be foundry grades produced from No. 2 steel.”
The new machine will have other applications that Harry is keeping to himself until the time is right. “I’ve got a couple of exciting concepts to announce as the machine becomes a reality,” he says. “No one would have thought of what I’m going to do as a sideline with my rotary shear.” His home city of Louisville will benefit from some of the new machine’s capabilities, he hints, once it’s up and running in summer 2008.
And then? “When these two projects are complete, I’ll bow out,” Harry says. Well, maybe not entirely. “What I’m going to do with this model yard will be a real surprise and take a lot of explaining,” he says. “We’ll have a lot of visitors, and I think they’ll want to know how and why we did this, so I’ll be there to tell them.”
Harry’s History
Born: March 14, 1927, in Detroit.
Education: After one year at the University of Michigan (Ann Arbor), he transferred to Wayne State University (Detroit), where he earned a B.A. in mechanical engineering.
Military Service: Served in the U.S. Navy as an aerial gunner, machinist, and clerk for 18 months from 1945 to 1946.
Family: Married Roberta Fell—whose family was in the scrap business—in 1953. Four children—Debbie Montz, Alisa Pipkin, Ron Kletter, and Tina List—and six grandchildren. Debbie and Ron work in the business, while Tina and Roberta manage Harry’s personal holdings.
Career: With the exception of working with his family and six months for American Compressed Steel Corp. (Cincinnati), Kletter has been his own boss, sometimes with a partner. Currently, companies under the Industrial Services of America umbrella include ISA Recycling, Computerized Waste Systems, and WESSCO (which specializes in equipment sales, service, and rentals), along with 50 acres of development land next to the scrap operation.
Personal Influences: Abe Byer of American Compressed Steel Corp., Irving Fell of Fell Iron & Metal (Bloomington, Ind.), Stanley Kaplan of M.S. Kaplan Co. (Chicago), Joe Mansbach of Mansbach Metal (Ashland, Ky.), and Irving Rifkin of Superior Cos., now OmniSource Corp. (Fort Wayne, Ind.).
Honors: In 2003, Kletter was inducted into the Environmental Industry Associations Hall of Fame, which recognizes leaders who have been actively engaged in the waste industry for at least 25 years and whose creative ideas, innovative concepts, and contributions have made a significant difference to the industry as a whole.
Hobbies: Tennis, working out with weights and on the treadmill, travel, and mentoring.
Jim Fowler is retired publisher and editorial director of Scrap .