(FORTUNE Magazine) – FOR YEARS Thomas Stephens seemed destined to play permanent second fiddle to Josh Hulce at Manville Corp., the building-supply giant and onetime producer of asbestos. But events in late April abruptly shattered that scenario. President Hulce, at 43 the prototype yuppie to some of Manville's employees and apparently the next chief executive, mysteriously quit. Stephens, also 43, a self-described ''Arkansas redneck,'' got Hulce's job along with a promise that he will be named chief executive September 1. But not everyone would want this job: Stephens's new task is to resuscitate one of the most celebrated bankrupts in U.S. history. He will have to improve Manville's performance dramatically just to keep the company alive. Four years ago, stricken by thousands of lawsuits from people claiming damages caused by its asbestos products, Manville rushed for shelter under Chapter 11. Over the next 25 years or so, the company must put something like $3 billion into a trust fund for the victims. Manville proposes to provide just over half that amount through bonds. Insurance would provide another $615 million. The company would pay $150 million in cash immediately and up to 20% of profits annually, starting four years after the plan is adopted. Manville will also issue new stock to the trust fund, doubling the number of shares outstanding, and in a worst-case scenario might have to dilute the stock much more. In addition to that enormous proposed drain on Manville's resources, the company wants to invest $788 million to ensure that the goose is sound enough to keep laying eggs. The company would also be a lot healthier if it could retire $500 million of high-interest debt. Last year Manville lost $45 million. Without an extraordinary charge of $120 million it would have made a profit of $75 million, but that sum looks paltry next to all these demands. Stephens insists his company can meet its gargantuan bills simply by getting & more out of its three main businesses: fiberglass (which contributed $803 million of sales last year), forest products ($459 million), and a specialty group, which makes such items as asphalt roofing ($674 million). He contemplates no significant change in this mix and does not plan any new businesses. A cornerstone of Stephens's program for Manville is to regenerate the once ebullient spirit of its 21,000 employees, many of whom have become hangdog in recent years. He believes he can. ''We've got a lot of rebuilding to do,'' he says, ''attitudes to change, habits to change. We've got to prove ourselves.'' But, he insists: ''We are infinitely capable of doing that. If I didn't believe that we could, I'd be back cutting down pine trees.'' Harvesting pine trees was the family chore assigned to Stephens when he was 14, growing up in Crossett, Arkansas, just north of the Louisiana line. Crossett had been a company town in the old tradition: Most people not only worked for the company's paper mill but also lived in company homes and shopped in company stores. The Stephens family had always been independent, thanks to a mid-1800s land grant of 160 acres. Things had not changed much when Tommy was growing up as a member of the fifth generation. His father and Uncle Harry raised livestock and vegetables and ran a pulpwood business and a welding shop. There was a richness of family, too. Bevies of uncles, aunts, and cousins lived in homes stretching along U.S. 82 on the west side of town. The house where Stephens grew up had the highest Stephens head count, eight in all, including his grandparents, parents, an aunt, his elder sister, a cousin, and himself. Today the clan, as they call it, is more spread out. Like Stephens, many of the fifth generation have moved away. Their exploits make good grist for the family newsletter. But there are still seven housefuls of them on the family property, including his parents, and 60 or more people regularly show for family reunions, Thanksgivings, and Christmases -- gatherings that sometimes include the mock trials to which anybody marrying into the family is subjected. The intended is quizzed about Stephens family trivia and Arkansas; each is certainly expected to know what a razorback is, for example. (It's not just a hog, it's a human representing the University of Arkansas in athletics.) Stephens broke this tradition six years ago, getting married first. The following Christmas, the trial of Alice Stephens took place anyway, Aunt Hazel (who lives four houses down) presiding. Another part of growing up for Stephens was learning about the outdoors and learning to love it. That abides in him still. Duck hunting remains a passion, and he fishes, takes long hikes, and drives a four-wheel motorbike through Colorado's mountains. ''Anything to explore the woods,'' he says, best of all with a dog. He has had dogs all his life. Currently it's Beaux Rouge, a retriever and one of Delta Air Lines' frequent fliers, who often accompanies Stephens on visits home. Stephens has quit deer hunting, something many people in his part of Arkansas do from horseback and with a pack of hounds. Stephens also wanted to chase higher education, but his high school guidance counselor thought little of his plans to go to college. His sister Nancy Toon, a nurse who runs a local clinic with her doctor husband, recalls that the counselor once even ''told him he might as well go dig ditches. Tommy got good and mad, so maybe he did him a favor.'' Says Stephens: ''He did.'' He hit the books harder. And he made it to the University of Arkansas, where he studied industrial engineering, ''a half management, half engineering'' course that enabled him to get involved in ''economics, management techniques, and finance.'' To pay his way, he landed a summer job ''as a flunky'' at a mill in West Monroe, Louisiana, some 60 miles south of Crossett and headquarters for worldwide operations of Olinkraft, Olin Corp.'s forest products subsidiary. West Monroe would be Stephens's second home for most of the next 20 years. When Stephens was a senior his father suffered a serious heart attack, and Stephens offered to go home to run the business. His father wouldn't hear of it. Instead he sold the logging operation, and Uncle Harry took over the welding shop. Stephens got his degree and went on to earn a master's, basing his thesis on time studies he conducted at an Olinkraft plant one summer. He then went to work for Olinkraft as a full-fledged engineer. Colleagues from those days remember how Stephens used to sneak into the company's computer room at night, often carrying a blanket, in order to shortcut the company's stifling rules on computer use. The supervisor angrily noticed the same thing and finally voiced a formal protest to John Mullens, the general manager. Mullens sent for ''this interloper'' to find out what was going on. ''He vigorously defended what he was doing, and I was kind of intrigued,'' recalls Mullens, now retired. ''To cut a long story short, I put him in charge of the data processing department.'' That move also won Stephens a nickname: ''Computer Tom.'' HOWEVER ADEPT Computer Tom might have been, he fell short of Mullens's expectations in one important way. ''Tom could be intolerant of people with less mental capacity. He was much brighter than most of his peers, and he had a propensity to lose his temper when they didn't grasp his ideas. At meetings he'd let his dander rise. I saw it was going to be a problem.'' Mullens often spoke to Stephens, to little avail. Finally, he says, Stephens made a mistake that taught him the necessary lesson in humility. He spent some $200,000 on a computer program that though faultless in conception was a complete waste of money: ''It didn't provide the information they needed,'' Stephens says. Mullens patted him on the shoulder and told him to try again. The affair didn't entirely quench Stephens's temper. Even today, close associates are wary of potential explosions. In 1974 Olin spun off Olinkraft, and Stephens soon became the new company's treasurer. ''I learned a lot in a short time about Wall Street and how it works,'' he says. He also got too immersed in his work, and his first marriage collapsed -- ''a classic story of drifting apart,'' he recalls. ''I was traveling around the world, she was at home raising two kids.'' When Manville bought Olinkraft in 1979, Stephens moved up again, in more ways than one. He went to Denver after Manville's president asked for Olinkraft's ''brightest young man'' to work as his assistant. Used to the near-sea-level altitude down home, Stephens found it hard to breathe or sleep in the mile-high city. Once he took refuge in a hotel bathroom, filling it with steam. That night a rare, deep sleep was shattered by the clang of a fire alarm, set off when the steam tripped a smoke detector in the corridor. Denver's altitude still bothers him, despite a recent sinus operation. To his relief, Stephens was sent back to West Monroe a year later as head of the wood products division and was soon promoted to president of the entire forest products subsidiary. Forest products was still reeling from its takeover by Manville. Plants had been closed and 20% of salaried employees fired. Stephens was the only officer left from Olinkraft. The new paper machine wasn't working. Morale was low, profits down. Then in 1982 Manville filed for bankruptcy. Stephens resolved to turn around the situation in West Monroe and did, though he had to close the operation where he had first gone to work as a college student. Stephens says that telling its employees about the decision was the most ''emotionally disturbing'' experience of his life. In an effort to lift morale elsewhere in the forest products business, Stephens ''did a lot of cheerleading,'' he recalls. ''One of the first things I did was to have breakfast with every salaried employee, in small groups, and try to communicate what we were going to do. I wanted everybody to buy in.'' Net income doubled in two years. Stephens's performance impressed Manville's beleaguered management, which suddenly wanted him back. Stephens's father was baffled when his son announced his decision to go to Denver as a vice president: ''The idea! A son of mine gets to be the president of a big paper company and you're giving it up.'' The Denver job, he warned, was nothing more than ''a nickel-and-dime vice presidency of a bankrupt company. I can't understand.'' When Stephens gave his reason, his father retorted: ''Son, you can't eat challenge. You're jumping into something that's pretty hairy.'' Says Stephens: ''I spent most of my career jumping into hairy situations. I'd learned that where there are problems, that's really opportunity. Generally the risk of staying in a static situation is greater than going ahead and making something happen.'' Josh Hulce's status as Chairman John A. McKinney's golden boy did not escape Stephens. It was equally obvious throughout corporate headquarters. Stephens was seen as less than charismatic, a number cruncher, a tough ramrod but perhaps limited in his grasp of what all of Manville was about. Hulce, a former Philadelphia lawyer, was visibly and contagiously imaginative, spinning off ideas like sparks, constantly in tune with the ever-changing big picture. Like everybody else, Stephens figured Hulce would be the next chief executive. Hulce did become president, and McKinney's heir apparent, in late 1984 -- then resigned suddenly last April. He won't talk about it, and Stephens says only that his friend quit ''for his own reasons,'' as he ''grappled with what to do with the rest of his life.'' To Chairman McKinney, who retires September 1, Hulce's departure must have seemed a betrayal. McKinney admits that among all the talented young people he had considered as potential heirs, ''Josh was like the No. 1 child. It's like ^ a family -- it's difficult not to have a favorite.'' Hulce's resignation left McKinney ''puzzled and disappointed.'' Stephens had already seen that Hulce was ''deeply troubled'' and had discussed the situation with his wife. She had given her support should the presidency be offered to him. McKinney broached the subject in Stephens's office. ''We've got a problem here,'' McKinney said. ''We've got a position to fill.'' They and a few other top executives discussed alternatives, such as leaving the slot open or forming a management committee. But, as Stephens recalls, ''It boiled down to a consensus that the group wanted me.'' And so, ''I found myself with this job. It wasn't something that I necessarily coveted or set out to get.'' THE STEPHENS CLAN was ecstatic when the job became official. The only sour note was that the news was squeezed off the front page of Crossett's weekly, the Ashley News Observer. That same week a new plant manager was named for Georgia-Pacific's local mill, clearly a more important story. Since he spent so much of his career at the forest products operation, Stephens remains something of a mystery man at Manville. McKinney praises his quick and keen intelligence. Maybe more important, he admires Stephens's ability ''to know what he doesn't know.'' Employees, particularly the older ones who have seen a succession of management changes over the years, are more cautious. To win them over, Stephens is holding a series of small meetings similar to those he once held at forest products. He is shy and self-effacing and sometimes seems the least comfortable person in the room. Confronting the asbestos issue early, he says the company is responsible for the harm it caused, even though he and many at the table were in grade school in the heyday of asbestos production. The only hard question he dodges -- he has to, he says, because of Securities and Exchange Commission rules -- is where Manville common shares are heading. Their value has dropped 82% since the company entered Chapter 11. Stephens estimates that many Manville employees with a stake in the company have taken drubbings of up to $5,000 each. Stephens himself is sitting on a paper loss of only $4,725 on his common shares, which he received when Manville bought Olinkraft. The biggest loser among employees: Chairman McKinney, whose common- stock holdings have plummeted $189,000 in value. Manville's board eased the pain a bit by granting McKinney a $1.3-million retirement package, enraging a shareholders' committee (the board also granted Hulce $530,000). Stephens does not criticize these payments. As to events that he will discuss, Stephens says the next 18 months will be spent ''getting the house in order.'' Persuading employees and customers that Manville is here to stay is a principal goal. The following five years will be what he calls the ''make it or break it'' period, a time to boost cash flow to the point where the company can meet its commitments to creditors. Then will come the long stretch where, he believes, Manville will become more flexible and build itself back to the industry leadership position it enjoyed not all that long ago. Most outsiders, including competitors and security analysts, have faith in Manville's future, and naysayers are hard to find. Stephens is unlikely to be around by the story's end. ''If I'm here five or six years from now, it's your fault, not mine,'' he recently told one of his top executives. ''That's long enough for anybody to be a C.E.O.'' Instead, he'd like to become a teacher at a business school and talk about his experiences. However things turn out, his classes won't be boring. BOX: INVESTOR'S SNAPSHOT MANVILLE SALES (LATEST FOUR QUARTERS) $1.9 BILLION CHANGE FROM YEAR EARLIER UP 3% NET LOSS $45.2 MILLION CHANGE PROFIT YEAR EARLIER RETURN ON COMMON STOCKHOLDER'S EQUITY -8% FIVE YEAR AVERAGE -2% RECENT SHARE PRICE $3 PRICE/EARNINGS MULTIPLE N.A. TOTAL RETURN TO INVESTORS (12 MONTHS TO 6/20) -55% PRINCIPAL MARKET NYSE

BOX: ALSO IN THE CHAPTER 11 CLUB Tom Stephens isn't the only executive with the dubious distinction of running a famous U.S. company in bankruptcy. Three others and how they're faring: Ryal Poppa, 52, chief executive of Storage Technology Corp., which makes computer equipment, joined the company three months after it filed for + bankruptcy in late 1984. Storage had grown too fast and could not maintain quality or deliver new products as promised. Business plummeted. Poppa laid off half the company's 16,000 employees and concentrated on Storage Tech's basic and always profitable products: tapes, disks, and printers. Sales and profits are growing, and Poppa predicts the company will rise out of Chapter 11 by January. After 47 years at Ford, George Ferris, 69, joined Wheeling-Pittsburgh Steel last September. In April the steelworkers' union had refused to go along with proposed wage cuts, forcing the money-losing company to file under Chapter 11. Ferris argues Wheeling has turned the corner, largely because of a newly cooperative labor force. This year's first quarter showed a profit, the first in two years. While Ferris won't speculate about when Wheeling-Pittsburgh will emerge from bankruptcy, he says that nowadays, ''We can almost look bankers in the eye.'' E. Claiborne Robins Jr., 42, represents the fourth generation of his family to run A.H. Robins, whose corporate health is suffering from its dangerous Dalkon Shield birth-control device. After paying $530 million to settle some of 15,500 legal claims, the company filed for bankruptcy protection last August. A few weeks ago federal investigators charged that top executives spent about $22 million -- some on bonuses to themselves -- that should have gone to pay creditors and victims. Chairman Robins declines to comment on prospects for the company. Security analysts think it will survive.