Lego dismisses rumors Westinghouse chief rules out Chapter 11

October 20, 1992|By Ted Shelsby | Ted Shelsby,Staff Writer

The chairman of Westinghouse Electric Corp., Paul E. Lego, went on the offensive yesterday to shoot down what he called "preposterous" speculation that the company might be headed for bankruptcy court.

Mr. Lego expressed disappointment in his company's third-quarter results, which were released a week ago, but said he had no idea how rumors concerning a Chapter 11 bankruptcy filing got started.

"Any rational analysis of our financial condition could not support such an idea," Mr. Lego said in a lengthy statement regarding Westinghouse's financial health.

Take away the problems at the company's troubled financial services unit and there remains "underlying strength in the corporation," Mr. Lego said. He noted that the rest of the %J company generated so far this year nearly $700 million in operating profits -- $244 million in the third quarter alone -- 11 percent ahead of last year's pace.

Mr. Lego issued his statement after watching the company's stock fall nearly 20 percent last week. At one point, shares in Westinghouse hit an 18-year low of $10.75. The stock recovered a bit yesterday, closing at $12.375 a share, up 62.5 cents on the day.

Westinghouse shares have came under Wall Street scrutiny since the first of last week when the company reported earnings of $14 million after taking a combined third-quarter write-off of $155 million.

Friday's announcement that the company's Electronic Systems Group in Linthicum would cut 1,400 jobs by the end of the year did nothing to boost Wall Street's faith in the company, but "it was not a key factor" in the bankruptcy rumors, said Jay McCaffrey, a Westinghouse spokesman in Pittsburgh.

Stressing the positive, Mr. Lego said operating margins increased to 8.2 percent from 7.3 percent a year ago -- after excluding the results of its financial services unit and the $160 million provision for corporate-wide cost reductions.

The company's Financial Services unit posted a loss of $99 million for the most recent quarter, but Mr. Lego said the company was continuing its strategy of reducing its exposure to the weak real estate investments that have hurt that division's results.

Mr. Lego pointed out that the company has a $6 billion revolving line of credit and said Westinghouse's balance sheet was strong.

Regarding the company's defense operations, which are located primarily in Maryland, Mr. Lego said that "Electronic Systems is ahead for the nine months and should have an improved year despite pressure on defense spending."

Mr. McCaffrey, responding to a Reuters report about a possible closing of the local division, said "there was no substance to the report."

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