It all started to go bad in 2002 when the Brazilian real strengthened against the dollar, cutting the company's revenues from its huge operation there almost in half. The next year, Kenneth retired and Todd became chairman.
The third generation of Herrick leaders took over in the face of a perfect storm: the price of raw materials was skyrocketing, and Chinese companies were taking over the window air conditioning market from the American manufacturers Tecumseh supplied. The company lost $220 million in 2005 and $80 million in 2006, and rumors of bankruptcy surfaced.
"Things were pretty grim by the end of 2006," says company spokeswoman Teresa Hess. (Both Tecumseh and the Herrick family prefer to wage their battles for public opinion through proxies. Neither the Herricks nor Tecumseh's management agreed to be interviewed for this article.) "Herrick family management, though they had built a very successful company, were without the background and/or expertise to fix things. In the era of globalization, they lacked the skills to handle a global operation and to turn around a global company."
The company's five-member board of directors, then still controlled by the Herricks, went looking for new investors. But few were interested in a company that was hemorrhaging money. Late in 2006 they cut a deal with Tricap Management, a New York investment fund known by some as a "vulture investor"-a firm that buys into debt-strapped companies with an eye towards selling off the assets if the company can't be saved.