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ANDREW HAEG: Peter Lytle is new to the catalog retailing business, but his interest in Fingerhut fits a pattern he's already established.

PETER LYTLE: One of the things that we look at whenever we get involved with a company is the history behind it.

ANDREW HAEG: At a recent press conference, Lytle described the kind of company that attracts his attention.

PETER LYTLE: If you take a look at some of our previous transactions, we tended to go into companies that had a very strong brand identity or a very strong basis, where they had an established customer base. They had models that worked well.

ANDREW HAEG: Fingerhut had a long record of success before Federated Department Stores acquired it three years ago, and the company's struggles began. That story is similar to another of Lytle's turnaround candidates.

The Faribault Woolen Mills is Minnesota's oldest private company. The mill sits in a modest brick building beside a waterfall in Faribault, Minnesota. A man named Carl Klemer founded the mill in 1865. He helped build it into one of the most highly respected brand names in textiles.

MICHAEL HARRIS: You're now going to walk into history.

ANDREW HAEG: CEO Michael Harris walks onto the factory floor, where workers take dirty wool, wash it, dry it, dye it, spin it into yarn, and weave the yarn into Faribault's trademark blankets. In 1997, the company was close to shutting these machines down for good and laying off about 120 workers.

The mill thrived during much of the 1990s. Retailers Land's End and the Pottery Barn were selling lots of Faribault's blankets under their brand names. Airlines kept Faribault's machines humming with constant demand for wool blankets, but the company lost vital business when the airlines started buying cheaper cotton and acrylic blankets, instead of Faribault's more expensive wool ones.

They were selling fewer blankets. And soon, workers were idling machines. CEO Michael Harris is also a partner in the business development group. As the machines went idle, he says, the company started faltering.

MICHAEL HARRIS: Without faulting the prior management, I think that they got put into an economic and industry change that they either didn't know how to react to, didn't have the resources to react to, or they just did not have the necessary business skills to understand it.

ANDREW HAEG: Harris says loss of the airlines business, coupled with rising imports, costly new projects that reaped little revenue, and an industry-wide shift toward more powerful retailers, was too much for the former management team.

MICHAEL HARRIS: Unless you adapt and figure out what your niche is, you will face your own degree of Armageddon, which is what this company faced.

ANDREW HAEG: In 1997, bankers threatened to shut down the mill. Lytle's group took control in early 1998. Plant manager Brenda Shepherd says, Lytle's group gave employees, the responsibility for making the company a leaner, more efficient operation.

BRENDA SHEPHERD: By us learning to work slim, I think it's something that a lot of other manufacturing facilities can't do. And that's why they're shutting down and laying off all these people. And we just did it smart. And it's worked.

ANDREW HAEG: But under Lytle's group, Faribault did trim jobs. One of those laid off was David Klemer, a member of one of the founding families. He worked at the mill until last year. Klemer, says Lytle saved the company. But he says, Lytle has yet to deliver on the big promises, he made when he bought the company.

DAVID KLEMER: When he came in, he said, this company, we're going to turn it around. And I'm going to make you guys all millionaires. Well, I'm still waiting for my check.

ANDREW HAEG: Klemer says, Lytle's group doesn't understand the intricacies of running a textile mill.

DAVID KLEMER: There's things that you do that doesn't seem right, but for that company, it's right. And it's the only way you're going to make money.

ANDREW HAEG: Lytle was unavailable for comment as he's studying a potential purchase of Fingerhut. Lytle's past efforts have brought him to several different industries. In 1998, Lytle's group bought a courier service, United Shipping and Technology. They renamed it Velocity Express. And in two years, boosted sales from $1.5 million to $660 million.

Two years ago, he helped buy out a pasta company in North Dakota, and later sold it for a healthy profit. Now, Lytle is pursuing an offer for the nation's second largest catalog retailer. Peter Tourtellot, Chairman of the Turnaround Management Association, says turnaround specialists can be successful, even if they lack direct experience in the industry they're moving into.

PETER TOURTELLOT: Profit is profit. Inventory is inventory. Too little cash is too little cash. And we haven't yet talked about the product. What we find is that there are people inside these companies that know their industries very, very well.

What they're lacking is the business leadership that the turnaround professional can bring to that situation.

ANDREW HAEG: Tourtellot says, it takes a rare business person to turn around a company.

PETER TOURTELLOT: Not every manager, who operates a successful enterprise, can do a turnaround.

ANDREW HAEG: In particular, Tourtellot, says, it takes someone who relishes intellectual challenges and who doesn't mind working under extreme pressure. And Tourtellot says, it takes someone who's focused less on profit than on the satisfaction that comes with saving a failing business.

PETER TOURTELLOT: If you can go into a company that is financially sick and broken, and people are about ready to lose their jobs, and you can walk away from that company where you have kept the jobs intact, you've restored the company to financial health.

It's so exhilarating, I can't tell you.

ANDREW HAEG: Federated Department Stores has said it would shut down Fingerhut, unless a buyer emerges. But even if Lytle's group buys Fingerhut, some pain is likely. The Faribault Woolen Mill now employs 10 fewer people than it did when Lytle's group acquired it.

And Lytle's says, Fingerhut will have to shrink before it can grow.

PETER LYTLE: It will likely be smaller, as virtually every company is today smaller. But if it's well positioned, and if it's well financed, it should grow back to where it was in a very short period of time.

ANDREW HAEG: But perhaps unlike Faribault, Lytle says, Fingerhut should rebound quickly, if and when his group acquires it. He says, Federated has already taken many steps needed to revive Fingerhut.

PETER LYTLE: Fingerhut has already gone a tremendous distance in correcting their problems, so this probably for us is going to be, although, a difficult task, one that should go relatively quickly.

ANDREW HAEG: Peter Lytle has said, he'll likely announce this week whether or not he'll buy Fingerhut.

I'm Andrew Haeg, Minnesota Public Radio.