The Herald, Sharon,
PA Published Tuesday, Nov. 3, 1998

RELATED STORIES: Cleanup at WE can begin
Chronology of the Westinghouse Sharon plant


What happened to Westinghouse?

Here's what became of WE
As Westinghouse Electric Corp. morphed into what is now CBS Corp., an American icon was dismantled. Here is a sampling of the businesses it sold:

  • 1994: Distribution and Controls -- (circuit breakers and other electrical devices). $1.1 billion to Eaton Corp. Merged into Eaton's Cutler-Hammer business.

  • 1996: The Knoll Group -- (office furniture). $565 million to Warburg Pincus Ventures LP. Warburg took it public and it's booming.

  • 1996: Defense Electronics -- (radar and electronics systems for the military). $3 billion to Northrop Grumman Corp. Doing well, even in an era of smaller defense budgets.

  • 1997: Thermo King -- (refrigeration equipment for transport industry). $2.56 billion to Ingersoll-Rand Co. Remains an industrial jewel.

  • 1998: Westinghouse Energy Systems -- (nuclear power) and Westinghouse Government Operations (nuclear waste cleanup and management). $238 million to Morrison Knudsen Corp. and British Nuclear Fuels Ltd. Deal not yet closed.
The Wall St. Journal

PITTSBURGH -- Michael H. Jordan will go down in history as the man who dismantled an industrial icon while building a media powerhouse.

Fragments of the old Westinghouse Electric Co. sold under his watch are now associated with nearly a dozen other names, sometimes as divisions of bigger companies, others as free-standing concerns. The one pattern: Most of them are doing quite well.

Knoll Inc., for instance, a maker of snazzy office furniture, went public last year after it was bought by a unit of E.M. Warburg Pincus & Co. in 1996. "Knoll is thriving," says Coco Kim, a spokeswoman, adding that Knoll's sales and earnings in each of the past three quarters were record breakers for those periods in the company's history.

Westinghouse acquired what was then called CBS Inc. in 1995 and last year changed its name to CBS Corp. Jordan, 62 years old, announced his impending retirement as chief executive and chairman of CBS on Wednesday.

Jordan joined Westinghouse in 1993, becoming its first outside CEO in 64 years. At the time, the company was still reeling from massive losses in its financial-services business. Jordan has often said the company was in far worse shape than most outsiders imagined.

"When he got there, he found himself sitting at the helm of a mess," says Greg Drahuschak, an analyst at Janney Montgomery Scott Inc. in Pittsburgh, who, like many analysts and industry observers, now contends Jordan ultimately had no choice but to liquidate the troubled operations.

Yet Jordan's dream was to be the man who saved the crumbling conglomerate, and initially he sought to do that -- by building up its profitable media operations and giving the most salvageable of the industrial lines time to recover some of their old glory. It was Westinghouse, after all, that had spearheaded the development of everything from electric stoves to radar. In a 1994 letter to anxious shareholders, Jordan likened the company to a naval ship "when it turns to the open sea and advances its engines to full speed."

But this ship had leaks everywhere. It was saddled with a host of lawsuits involving power plants, bloated costs -- such as $14 just to process a single expense form -- and staid businesses headed by managers who loathed risk taking.

Initially, Jordan thought he could do limited surgery -- such as shedding the company's money-losing real-estate and furniture businesses and building up its core power-generation and defense-electronics lines. However, the underlying problems were too great.

Example: Westinghouse had invested heavily in building up its conventional power-generation business, figuring that fast-growing countries such as China would eventually become big customers for turbines and other equipment. The trouble was that many other manufacturers were chasing the same customers; and it doesn't matter how much you sell, if the price isn't right. Meanwhile, established markets like North America and Europe were mature.

Siemens AG of Germany bought that business last year, largely as a consolidation move. Since then, the power market has perked up. The U.S. market has been strong this year; and prices have increased. "There's a line to buy turbines," says Mimi Limbach, a former Westinghouse spokeswoman who still watches the industry closely.

Jordan hadn't intended to preside over what came to be seen as an industrial garage sale of mammoth proportions. But the decision to liquidate assets such as the turbine business was grounded in simple economics: The businesses sold were more valuable to other industrial companies than to a company increasingly focused on broadcasting. Moreover, the deals often had the effect of helping to clean up the businesses -- with Westinghouse absorbing a chunk of the liabilities associated with the sold business.

But Westinghouse also benefited by shedding liabilities. The case of Thermo King is illustrative. When the company announced plans to sell the operation to Ingersoll-Rand Co. last year, it said a big reason was to help fund "certain liabilities," including about $2.5 billion in unfunded pension and retirement benefits. At the time, Westinghouse estimated just making those payments would amount to $375 million a year over the next five years.

It isn't as though selling off industrial businesses was an innovation of the Jordan era. Many of the conglomerate's best-known businesses -- such as light bulbs and appliances -- had been sold long before his arrival. Jordan did, however, often succeed in getting top dollar for the operations he sold.

Even in retirement, he will be paid well for his efforts. How much he collects depends on whether CBS treats his exit as a retirement or a resignation. "A lot of them [CEO departures] are portrayed as retirement -- and they still collect severance," observes Judith Fischer, managing director of consultants Executive Compensation Advisory Services in Springfield, Va. CBS declined to comment on the financial terms of Jordan's departure. Jordan was unavailable for comment.

Under CBS's severance plan, Jordan would collect $4.5 million; that represents two times his highest salary and the sum of his two most recent bonus payouts (1996 and 1997), according to Ms. Fischer. If he simply retires, he is eligible for a $1.5 million annual pension. In addition, all of his stock options will vest upon retirement. At the end of 1997, he had 1.8 million exercisable options then worth $20.7 million and another 566,667 unexercisable options with a year-end value of $4.7 million.

RELATED STORIES: Cleanup at WE can begin
Chronology of the Westinghouse Sharon plant

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