By Diane Brady and Pamela Moore
In the halls of Honeywell International, it had been clear for some time that Chairman and CEO Michael R. Bonsignore had to go. First, there was the lingering morass from the December, 1999, AlliedSignal merger, which failed to realize its potential and produced a disappointing string of earnings shortfalls.
Then, while the proposed $45 billion merger with General Electric was unraveling, Bonsignore, 60, seemed to sit largely on the sidelines -- except for a very public, almost frantic plea to GE CEO Jack Welch in the last week of June. With the European Commission's July 3 vote to block the GE deal on anticompetitive grounds, it's no wonder that Bosignore quit on the night of July 3 as the Honeywell board met to wave him out the door and usher in a savior.
Honeywell's new chief is Bonsignore's former boss, Lawrence A. Bossidy.Question is: Can the 66-year-old former AlliedSignal chairman and CEO turn the troubled Honeywell around? The aerospace and industrial conglomerate is in a precarious position, with plummeting earnings, declining orders, and a brain drain that has been playing out since Bonsignore inked the deal with GE in October. Besides fixing the company, Bossidy will have to sort out its destiny: Should Honeywell try to go it alone or clean itself up to boost the price for the next suitor?
Luckily for shareholders and employees, Bossidy isn't the type to waste his time licking wounds. If anything, investors could welcome his appointment as a sign that Honeywell will finally get its act together. Bossidy's reputation on Wall Street is that of a performance-driven, charismatic leader who delivers steady results. Look for him to make some bold moves to boost the bottom line and stock price. And expect Honeywell to be more of a master of its own fate during any subsequent merger activity. As Tom Burnett, president of Merger Insight, says of Bossidy: "He's a no-nonsense closer."
In fact, some wonder why Bossidy stepped down so quickly as chairman of the merged company in April, 2000 -- just a few months after sealing the AlliedSignal/Honeywell deal. After almost a decade at the helm of AlliedSignal, he may have been more interested in the back nine than the boardroom. Bonsignore also didn't want a rival leader sticking around.
Insiders say Bossidy has remained active from beyond the executive suite, even advising his pal Welch on the ill-fated merger. He's still a major Honeywell shareholder, and what's more, he has a Welch-size ego and energy level that make him gravitate toward the top job.
Despite the bad news from Europe that the GE-Honeywell deal was dead, Honeywell's stock rose 3%, to $35.10 a share after rumors of Bossidy's appointment hit the markets. Employee morale, never strong under the somewhat aloof Bonsignore, will likely to rise with the hands-on Bossidy at the helm. Despite his millions, he's still a guy who prides himself on walking the factory floor.
Bossidy could have some rough going in the short term. He'll have to motivate senior managers who were counting the days until they could grab their hefty severance packages and exit. Plus, many of Honeywell's businesses will continue to suffer in the economic downturn.
Even so, Bossidy could make some quick fixes. A legendary cost-cutter out of the GE mold -- he was a vice-chairman there until 1991 and still golfs with Welch -- he'll probably continue making the big job cuts that Honeywell started this year under GE's direction.
He could also try to sell off the underperforming automotive and chemicals businesses, worth $4 billion to $6 billion, that Honeywell wanted to unload but couldn't while in merger limbo. Those have been dragging down performance and are one reason why earnings fell 20% in the first quarter of 2001 and are forecast to drop as much as 27% this year, according to Thomson Financial/First Call.
That's the easy stuff. But job No. 1 will be finishing the task that Bonsignore didn't complete: melding the warring cultures of Bossidy's AlliedSignal and Bonsignore's Honeywell. After 18 months, the cultural divide is still so great that one GE insider says buying Honeywell would have been like "trying to buy France and England. You could see the rift between the two companies." Among other things, Allied's cost- and efficiency-driven culture didn't mesh easily with Honeywell's focus on innovation and marketing.
Finally, Bossidy will have to write the next chapter for Honeywell. It's likely the company will soon be entertaining such suitors as United Technologies, which is expected to come courting again despite being jilted last October in favor of GE. Like GE, UTC is seeking greater heft and has a big aviation business that could tap into Honeywell.
Whether Honeywell races into another union or tries to hold out for a higher price, few expect Bossidy to linger at the helm. A successful sale could be the crowning move of Honeywell's new savior.
Brady is an associate editor, and Moore covers GE for BusinessWeek
Edited by Beth Belton