Jordan takes it slow in restructuring Westinghouse

January 16, 1994|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Conventional wisdom had it that Westinghouse Electric Corp. needed a good thrashing to bring it back into line. Divisions had to be sold, and quickly, while "fat" had to be "trimmed" and management bullwhipped into shape.

The problem with that view is that it was wrong, at least according to the company's chairman and chief executive, Michael H. Jordan.

Last week, while unveiling Westinghouse's second restructuring in 14 months, the 57-year-old former PepsiCo executive proved to be more of a discrete counselor for the company than the loud-mouthed drill sergeant favored by Wall Street's management mavens.

In his first major move since assuming the top job last June, Mr. Jordan gave a low-keyed analysis of the company's problems, bundled a few of these into a restructuring plan, announced more layoffs and job cuts and wrote off $750 million to pay for it.

The result on Wall Street was a dubious shake of the head: the stock closed at $13.125 Friday, down $0.875 since the restructuring plan was unveiled Tuesday. Stock prices usually rise after restructuring plans are announced because investors see them as a sign that management is coming to grips with problems.

Given Mr. Jordan's background, his deliberate methods are hardly surprising, nor is his conviction that a carefully reasoned approach to Westinghouse will reap more in the long run than a short-term spike in the stock's price.

"I don't know what not enough [action] means. Yes, there are savings possibilities, but nowhere near as great as people thought, myself included. If I wanted to take out 10,000 or 12,000 people, I don't know how I'd do that and still deliver a product," he said.

Instead, Mr. Jordan is committed to a quiet, long-term recovery for Westinghouse that will see the venerable industrial giant regain competitiveness in four "core" areas -- including the Maryland-based Electronic Systems Group -- while selling off the rest.

What bothered many on Wall Street is that this sounded suspiciously like the spiel they heard from Paul E. Lego, the former boss who was fired a year ago after failing to take drastic action. Under Mr. Lego's stewardship, Westinghouse's stock price nosedived from $39 in 1990 to $10 in the fall of 1992 as the company lost $2.4 billion.

"Westinghouse has always been a badly managed company, so people were looking for a lot from him [Jordan]. He did a reasonable job but didn't excite anyone," said Davis Smith of Conseco Capital Management Inc., a Westinghouse shareholder.

Excitement, however, doesn't seem to be part of Mr. Jordan's management style. In describing how he took the top job, he made it seem like the lesser of two evils: be bored playing golf and consulting for a New York investment bank or take on one of the biggest turnaround challenges in U.S. industry.

"I didn't know very much about Westinghouse. . . . I'd just read all the analysts' reports and some of the journalistic accounts of the company. I didn't really think I was going to do this until three days before it happened," Mr. Jordan said. "I think I was sort of bored."

Other chief executives may have more prominent jobs in U.S. industry, but few have one that combines virtually every recent problem faced by America's industrial giants: slow demand for certain heavy industrial products, cuts in defense spending, excessive borrowing and management strategies that put financial frolics ahead of sound expansion.

These challenges may save Mr. Jordan from the golf course, but they also tie his hands when it comes to restructuring Westinghouse in any dramatic fashion. The plan "clears the decks," as he put it, but is not the refitting expected on Wall Street.

The reason? Westinghouse can't afford another major overhaul because it already has fired 20 percent of its staff in its core businesses, borrowed too much and slashed as much as its balance sheet can take.

Instead, Mr. Jordan said he is planning to finesse a turnaround at Westinghouse by managing the products and people that he has under a better system.

In fact, it's managing that seems to enthuse Mr. Jordan more than discussions about turbines and radar systems.

His analysis showed that Westinghouse had many successes, such as the Longbow radar system being built in Linthicum, its turbines for power stations and its entire Group W radio and television broadcasting system, including WJZ-TV/Channel 13 in Baltimore.

The debt problem could be solved, he thought, by continuing to sell off assets, such as the Westinghouse Electric Supply Co., a wholesale distributor of electrical products, and Westinghouse Communities, a real estate development business. He decided against selling the Knoll furniture operations -- which were to be sold under Mr. Lego's plans -- but instead changed management with the intent of making it profitable.

Likewise he backed off ambitious plans that called for half of Electronic System's revenue to come from non-defense

products. Now only profitable nondefense work will be pursued.

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