VOICES ON... History

COMING APART: TWO CASES

ITT Founded in the 1920s as International Telephone and Telegraph, the conglomerate expanded fast under CEO Harold Geneen in the late 1950s and early 1960s, eventually buying more than 300 firms, including Sheraton Hotels, Continental Baking, and Avis Rent-a-Car. Geneen was forced out in 1979, and ITT broke into three separate public companies in 1995.

TRW Inc. The conglomerate began in 1901 and became involved in everything from to music recording to credit reporting. It also built electronic components and spacecraft. The company was acquired by—and folded into—Northrop in 2002.

Only a last-minute rescue from a government country, employing 29,000 workers and offering entity saved the pensions. 15,000 different products. Ling graced the covers But to understand the LTV story, one has to of Time and Fortune and was called “The Dazzling, go back to its founding by an audacious entre- Legendary Jimmy Ling.” By 1970, the company, preneur named James Ling, dubbed the “merger then called Ling-Temco-Vought (LTV), was in aero- king,” who boldly shaped the company with his space, meatpacking, sporting equipment, and elec- Conglomerate Collapse unique business vision. Born in poverty in 1920s tronics. Among its affiliates were Braniff Airways, Oklahoma, Ling pursued a career as an electrical Wilson Sporting Goods, and National Car Rental. contractor and eventually, with $3,000 saved, Charismatic and a fast talker, “Jimmy Ling LTV spawned the concept of the modern-day conglomerate. started Ling Electric. The business did well—but had presence,” wrote Neal Barrett Jr., a former But it couldn’t hold all its far-flung pieces together. Ling soon hatched a far more ambitious plan. executive at LTV. “He was there, in the room, and Deciding that building a company to sell a everyone knew it.” single product or service was too restrictive and But by 1970, a poor economy and stagnating slow-growing, Ling envisioned a path to riches sales, along with antitrust pressures, were wreak- By Glenn Rifkin and influence by another, as-yet-untried route: ing havoc at LTV, and the board forced Ling to mergers and acquisitions. He began acquiring step down as CEO. “Conglomerate kings are jug- hen LTV Corporation That demise dragged on through not one but companies using capital from shares in the glers,” Barrett wrote. “Ling was a good investor, declared bankruptcy and closed two major bankruptcies, and came long after the fledgling company that he sold at a booth at the but it’s hard to judge and manage companies that its doors for good in late 2000, firm had abandoned the sprawling approach for State Fair, raising an impressive $738,000 to have nothing in common. The people at the top W it marked the end of a most one product. The product happened to be steel, fund his venture. Ling “collected companies the often lack the expertise to manage the companies atypical and peculiar 50-year corporate journey. and even though LTV became one of the country’s way boys collect baseball cards,” according to his they control.” The Cleveland-based company, which had once largest steel producers, cheap foreign steel even- New York Times obituary. To him, it didn’t matter Despite trimming its portfolio down to just been among the most successful conglomerates in tually decimated it and the rest of the domestic what a company did or made, he would take over three lines of business, LTV faltered and began the United States, had been in so many businesses steel market. As the firm collapsed, nearly 82,000 that business and split it into different divisions, losing money. After trying to expand once more over its lifetime—from hamburgers to missiles to steelworkers, past and present, were left with sell stock in each of the divisions, and get enough with a new CEO, the firm decided in 1980 to focus steel to footballs to bomber jets—that it was nearly pension cuts and no healthcare benefits. Many capital from the banks to keep growing and grow- solely on the steel industry. It stayed that way for impossible to explain what exactly it did. But while of those workers, whose families had worked for ing. He called it “redeployment.” It wasn’t a Ponzi two decades until the crushing arrival of foreign LTV’s mergers and acquisitions playbook may have generations in steel factories in the Midwest, suf- scheme, but it was a risky venture. And it worked. steel. Though it had embraced a single-industry fathered the concept of modern conglomerates like fered from heart and lung issues. “This is really In just 14 years, Ling built LTV into the 14th business model—a strategy that certainly had ITT, GE, and Gulf & Western Industries, it also a human tragedy that is unfolding,” said Dennis largest company in the Fortune 500. From 1955 to Jimmy Ling spinning in his grave—it couldn’t nav- eventually led to its demise. Henry, president of the local union, at the time. 1965, LTV was the fastest-growing company in the igate a troubled market well enough to survive. 1

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