Spring Cleaning At Westinghouse

It's life in the slow lane. While his Westinghouse Electric Corp. colleagues spin deals and hobnob with stars in Hollywood and Manhattan, President Gary M. Clark runs the Rust Belt portfolio in Pittsburgh. With the defense and furniture units sold last winter to pay for CBS Inc., the onetime industrial behemoth is reduced to two core nonmedia businesses--electric power and refrigerated transport. And those are likely be unloaded, sooner or later, to pay for more media assets. Clark gamely insists that the $5 billion businesses are primed for growth. Actions, though, speak louder than words: He's retiring next year, at 62.

Unless Westinghouse's foray into the media business bombs, the company seems likely to spin off its remaining industrial chips, say Wall Street analysts. The transport business remains a cash cow, but Chief Financial Officer Fredric G. Reynolds notes that debt-heavy Westinghouse is poorly positioned to battle such financial powerhouses as General Electric Co. and Siemens in international power markets. "The question is whether we have the right capital structure to run these businesses," he says. Meanwhile, Reynolds and his boss, Chairman Michael H. Jordan, say they have their eyes on media purchases, from radio stations to cable outfits.

BREATHING ROOM. But don't count on an industrial fire sale. Unless Jordan and Reynolds suddenly surprise everyone by trying another behemoth media acquisition, Clark and his successor, Francis J. Harvey, should have time to build up the value of remaining companies. The strategy, says Clark, is to seek growth, invest in them, even make an acquisition or two. "Are we going to sit on these businesses and milk them?" he says. "The answer is no."

The model, says a Westinghouse executive, is Knoll Group. When Jordan arrived at Westinghouse in 1993, the office-furniture division was up for sale and bleeding red ink. Seeing that it would fetch barely $200 million, Jordan replaced management. Two years later, Jordan sold a now-profitable Knoll to the New York venture-banking arm of E.M. Warburg, Pincus & Co. for $565 million. He had similar success with the defense-electronics unit. January's $3.5 billion sale to Northrop Grumman Corp. exceeded analysts' expectations by as much as $1 billion.

The gem in Clark's portfolio is Thermo King Corp., the refrigerated-transport division that dominates its market worldwide. In 1995, its sales grew an eye-popping 21%, to $1.1 billion, and profits jumped 30%, to $176 million. Such performance makes it an easy sale, perhaps for as much as $2 billion, figures NatWest Securities Corp. Still, Westinghouse might sorely miss the cash Thermo King generates.

HEAVY LOADS. The electricity businesses are more problematic. Caught up in a glutted world market, the combined fossil-fuel and nuclear power-generation units lost $64 million in the first quarter, before charges, with sales falling 19.5% from the previous year. These businesses, worth an estimated $2.6 billion, are also tough to sell. Because of antitrust concerns, the Justice Dept. in the late 1980s blocked a power-generation sale to Europe's Asea Brown Bovari. Another option, says Reynolds, would be to draw technology partners, such as Mitsubishi, Fiat, and Rolls-Royce, into bigger equity roles.

For now, Clark is busy revamping the businesses. He's putting new managers in charge, and he's hurrying to reach settlements in a string of suits from 10 utilities involving allegedly defective steam generators. "We're nearing the end of the trail," he says, referring to the litigation. But it may be true in more ways than one.

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