Who's Really Out From Under At Westinghouse?

The industrial businesses could get a boost from Jordan's spin-off

Log on to the Westinghouse Electric home page, and you come face-to-face with ad icon Betty Furness in her guise as the 1950s-era Westinghouse woman. She's standing next to the heading "Things We Don't Make Anymore." It turns out to be a long list, from office furniture and lightbulbs to elevators and TVs. And it's about to get a lot longer. On Nov. 13, the Pittsburgh conglomerate announced it would spin off its remaining industrial units as a publicly traded company to focus on television and radio.

For Westinghouse Chairman Michael H. Jordan and his team of former PepsiCo Inc. and McKinsey & Co. execs, the sense of relief is palpable. By ridding themselves of the industrial businesses--which will have their own management and board--Jordan & Co. can close the books on their troubled detour through Pittsburgh. That means no more nuclear suits from utilities, no more poundings from the likes of Siemens and General Electric Co. in the killer markets of Asia. What's more, by focusing Westinghouse-CBS on broadcast, Jordan satisfies Wall Street, which couldn't figure out how to value a $9.5 billion company with one foot in a TV studio and the other in a nuclear-waste dump. Investors drove up Westinghouse Electric Co. stock 25%, to $20, in early November as rumors of the corporate restructuring swirled.

And the industrial side of the company? Analysts brush it off as a $4 stock, and judging from the shabby results under Jordan's 3 1/2-year reign, the pessimism is well-founded. The power-generation and nuclear divisions, for example, shrank during his tenure and turned in losses for two of the three years. But Westinghouse has a long history of unloading dozens of seemingly sorry businesses only to see them flourish under new owners. "Once they're free from Westinghouse, it's as if a weight has been lifted," says Eugene Finkin, a Miami turnaround consultant who advised Westinghouse in the '80s.

Just look at WESCO Distribution Inc., the company's onetime shipping and warehousing arm. In 1993, as Westinghouse reeled from a disastrous foray into real estate, Jordan, then working for a New York buyout firm, flew to Pittsburgh to look at the money-losing operation. His visit resulted in a double match-up: Westinghouse hired him, and eight months later his old firm, Clayton, Dubilier & Rice, acquired WESCO.

The buyout firm got the better deal. Westinghouse lurched from one downsizing to the next, shedding 25,000 jobs over three years. Meanwhile, a few blocks away, WESCO was coming back to life. Sales are up $800 million, to $2.3 billion, and the workforce has grown from 3,200 to 4,500. WESCO doesn't release results but says it's solidly in the black. "The most significant thing we did," says CEO Roy W. Haley, "was change the ownership."

ENDING THE SUITS. Turning around the industrial divisions might be tougher. The electric businesses face formidable competitors in the growth markets of Asia, and there's little sign of a nuclear renaissance in the U.S. Operating profits in the $5 billion portfolio fell 24% in the third quarter on slightly higher sales.

Still, despite Jordan's failures, he did make some fixes that could pay off. He pushed the $1.8 billion Power Systems Div. into joint ventures in China, which should ensure a healthy share in the world's biggest market. He invested with Rolls-Royce PLC in state-of-the-art turbines for the electric business. And he hammered out settlements on 12 utility suits that had been hanging menacingly over the $1.4 billion nuclear division.

For now, the industrial division faces more pain. The company recently announced job cuts of 1,100. Next year, as the stock is issued, the new board will hire managers, who will likely shake things up further. That has locals grumbling that Westinghouse is abandoning its 110-year-old roots. But if history is any guide, that might not be such a bad thing.

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