How Progressive insurance lost what made it progressive

By last fall, Progressive's stock price had fallen to $18.21 — the lowest it had been in four years.

This raises questions about the company's capacity to grow. People clearly aren't buying its stock, and that problem has persisted for months (the price was down to $17.76 in early March).

Last month, Progressive's claims chief of the past nine years, Brian Passell, was "separated" from the company without explanation. Such moves don't inspire confidence. "They're not growing," Sullivan says. "They need to get this figured out."

It's perhaps a sign of how bad things have gotten that corporate officials refused to talk to Scene for this story. There was a time when reporters could reach Lewis directly. Now calls are vetted through a PR team. Answers to Scene's questions were provided via e-mail and attributed to the company's human resources chief, Tricia Griffith.

She admits that having a well-known brand is key to competing with the GEICOs of the world and says that the Jacobs Field deal is designed to make that happen. As for the employees, they're still enjoying the same gyms, yoga classes, health centers, dry cleaning, and profit-sharing perks they always have. Those who were laid off were considered either "redundant" after Drive and Direct merged, or simply not necessary. She says the company's IT department was "overstaffed." In fact, she suggests that the layoffs, many of which affected higher-paid veterans, would help save Progressive from the problems that concern Sullivan.

"These changes allow us to operate more efficiently, which can help us bring competitive prices to more customers and grow our business," Griffith wrote.

But as one manager points out, it's been four months since the layoffs, and "Our stock prices are still not moving." She can't help but blame the people on top.

"Peter would have found some way to stimulate the business," she says. "He would've put Progressive out there in the forefront."

These days, the mood in Mayfield is dark. No one's sure whether more cuts are coming, and managers feel their every move is being examined from above. One says she used to be free to make many of her own decisions. Now, "I could still do that, but only after I get permission to do that."

She won't leave, because she has a son in college and "couldn't touch" the salary she's earning anywhere else. But she's frustrated, knowing that a company full of "some of the brightest people I've ever worked with" is being choked by fear and micromanagement. "I think that the business would be successful again," she says. "It's like you need to unleash those people."

Of course, no one is ready to write Progressive's obituary. Some analysts argue that the company's roaring growth of the '90s couldn't last forever — all rising empires inevitably plateau. "They had a golden age," Sullivan says. "That is rarely sustained for long."

John Ryan, an analyst for Morningstar, points out that the car insurance industry as a whole is suffering through a natural downturn after a boom. He's confident it's a temporary problem, and a well-run company like Progressive will recover in time. "People may be antsy . . . To us, it's nothing new," he says from his office in Chicago.

Adds Sullivan: "They're struggling, but the core of what they do is still excellent."

In the end, it's hard to kill the optimism bred by decades of success. Even Lantzy says he recently applied for another job at Progressive. "I really cared about the company," he says, "and in a funny way, I still do. It's just a big chunk of me."