UNC poised to take off Transformation: UNC, after struggling to get out of the nuclear industry, now appears ready to be a force in aviation services.

September 15, 1996|By Suzanne Wooton | Suzanne Wooton,SUN STAFF

It has been a bizarre transformation for UNC Inc., a decade-long struggle by the one-time uranium company to reshape itself.

Now, after years of unimpressive earnings, the Annapolis-based company (known until 1984 as United Nuclear Corp.) finally seems poised to take off, its recent purchase of Garrett Aviation Services propelling it to the forefront of the aviation services industry.

"It is finally happening. They're very definitely on the right track at this point," said Paul H. Nisbet, analyst with JSA Research Inc., a Newport, R.I., investment research firm. "With the acquisition of Garrett, they've got the critical mass they were looking for."

Indeed, the purchase comes at a significant juncture, with the airline industry recovering from its worst slump in history. It nearly doubles UNC's annual revenues to $1 billion a year while creating a work force of nearly 7,000 employees with operations in 25 states.

The acquisition of Garrett boosts UNC's share of the growing business-aviation services market from 22 percent to 52 percent, promising far more opportunities to provide maintenance and overhaul of private corporate jets.

"This is where we wanted to be when we grew up," said Dan A. Colussy, former president of Pan American Airlines who was hired in 1985 to guide the uranium company out of the dying nuclear industry.

"After a difficult time, we are beginning to turn around and tick up," he said.

In its transition, however, UNC has suffered no shortage of growing pains. It has bought and sold two dozen businesses -- ranging from telecommunications to environmental services -- and been mired in the airline industry's misfortunes. At the same time, it has been forced to spend millions to clean up nuclear sites from its former life.

Financial trouble

Repeatedly, its financial results have reflected its woes.

"They've been a story of continuing disappointments," said John T. Mahoney, an analyst with Raymond James Associates Inc. in St. Petersburg, Fla. "They'd buy companies and run them for awhile. Then, just about the time they buy some, others would go down the tubes. They get into some more debt and write down businesses they bought six years ago.

"There's no reason right now to think Garrett won't work, but I've seen this pattern over and over," he said.

But others say that given its permutations, the company has survived surprisingly well.

"I think it's quite incredible that they're even existing as a corporation at this point -- given what they attempted to do in a negative market environment," Nisbet said. "A lot of the problems UNC has experienced are the results of attempting to alter the nature of the company radically."

Company's past

The company, which operated once operated uranium mines, was also one of the earliest suppliers of nuclear reactors for the U.S. Navy. With the decline in the defense industry and the production of nuclear submarines, the uranium market all but disappeared.

"We had to exit the nuclear business," said Colussy, who became the company chief executive officer in 1985 after three straight money-losing years. Then president and chief operating officer of Canadian Airlines International, Canada's largest privately owned airline, Colussy was given carte blanche to reshape the company.

"I told the board that it had to become an aviation company," the 65-year-old Colussy recalled. "Aviation was the thing I knew."

But he also was well aware of the inherent difficulties of the aviation business.

After leaving Pan Am when it was still profitable in 1980, Colussy set out to start his own airline at an underusedBaltimore-Washington International Airport. Shortly after he put $1 million of his own money into the venture, the nation's air controllers went on strike, prompting the Federal Aviation Administration to cancel any slots not being used.

That dashed Colussy's hopes for a start-up airline, and he took over Canadian Airlines International for three years before coming to UNC in 1985.

Bad timing

By 1991, the fortunes of the aviation industry would haunt Colussy again. Just as UNC had finally sold off a mishmash of businesses and emerged solely as an aviation services company, the industry hit a downturn.

Demand dropped for new and rebuilt airline engines; UNC cut prices to keep its customers. At the same time, it was shelling out millions to clean up nuclear reactor sites, though the job of selling those sites was seen as "mission impossible," Colussy said.

After spending $20 million to clean up its 1,100-acre Naval Products plant in Connecticut, UNC finally sold it last year for $25 million to the Mohegan Indian tribe, which will open a $275 million gambling complex called Mohegan Sun Resort this fall. So daunting was the task of clearing regulatory hurdles and finding a buyer that the company's compensation committee rewarded Colussy with a $150,000 bonus.

Recently, UNC completed an eight-year, $35 million cleanup of a uranium mine in New Mexico, though it is still searching for a buyer.

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