Following first-ever takeover, Santee Sioux branch out on their own

David Fettig | Managing Editor

Published July 1, 1991  | July 1991 issue

Even though entrepreneurism is generally associated with the efforts of a single person, the Santee Sioux of North Dakota's Fort Totten Indian Reservation have made a case for a collective definition of the word.

Two years ago the Sioux engineered the first leveraged buyout of a corporate partner by an American Indian tribe when it gained full control of Sioux Manufacturing Corp., a defense contractor that largely produces camouflage. And, even though the company was a well-established business when the tribe gained full control, the tribe has still suffered the growing pains of an entrepreneurial company, according to Carl McKay, chief executive of Sioux Manufacturing.

"It was just like starting over," McKay says about the transition from a joint venture with Illinois-based Brunswick Corp. to a fully owned tribal company. "So many things happened all at once. I've gained a lot of gray hairs in the past year."

Sioux Manufacturing was formed in Devils Lake, near Fort Totten, at a time when the federal government encouraged the formation of reservation- based joint ventures to do contract work for the government, which guaranteed orders to ease the transition to Indian-managed businesses. Tension between the Santee Sioux managers and Brunswick developed almost immediately as tribal members—even after they gained 51 percent share in 1978—felt left out of major decisions.

The tension climaxed in 1986 when Sioux Manufacturing received a record $70 million in orders. The tribe wanted to schedule the work over a three-year period to ensure job and income stability for the firm's 300 Indian workers. Brunswick, however, decided to hire 200 new workers and complete the contracts in a year, after which hundreds of employees lost their jobs.

"It may sound strange to some people," McKay says, but the tribe prefers to have periods of stable growth and employment rather than a constant flux of hiring and firing. Sioux Manufacturing is not just in the business of earning profits, he says, it also has an important responsibility to the entire reservation.

Following the 1986 dispute, the joint venture deteriorated as both sides lost trust in one another: Brunswick officials planned to pay themselves a hefty dividend, key Brunswick employees were fired by the tribe, a lawsuit was filed against the Santee Sioux, and the tribe imposed a tax on all Brunswick dividends. Ultimately, an out-of-court settlement resulted in the tribe's leveraged buyout.

Today, Sioux Manufacturing employs about 300 and expects 1991 sales of $40 million. McKay says he hopes the company can grow to $50 million in sales and up to 350 employees after a few years, but until then he is more concerned about stabilizing the company's current business.

A lot is at stake for Sioux Manufacturing, according to McKay. He hopes the company can become an inspiration for other tribes across the nation. "If we don't assist other Indian tribes, nobody else will," he says. "I think this little company has done more to cure the social ills of the reservation than all the government aid we've received. Our people are very proud of that."

If McKay could change one thing about Sioux Manufacturing's impact on the reservation, it would be to find some way to channel employees' income back to the tribe. The company has a weekly payroll of about $200,000, most of which ends up in the hands of non-tribal businesses, he says.