Investors applauded when TRW Chairman and CEO Joseph Gorman announced a $7 billion deal for British auto parts maker LucasVarity in January. The company's brake products would fit with TRW's suspension and steering systems and help TRW in modular car assembly.

But so far, instead of synergy, TRW is getting management turmoil. TRW confirmed on Apr. 21 that LucasVarity CEO Victor Rice, who had been named co-chair of the merged company, would leave. TRW President Peter Hellman is departing as well. "We had different ideas and approaches," says Gorman, who insists that other top LucasVarity execs will stay.

Meanwhile, TRW's first-quarter earnings came in 17% below forecasts. Gorman concedes that cost-cutting, including plant closings and 7,500 layoffs, is behind schedule. Analysts are mixed: Kenneth Blaschke of BT Alex. Brown sees "worse to come" but points to "great assets." Gorman says the LucasVarity deal will eventually make TRW "a positive and powerful story."

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