Conference 7.286::digital

1910.0. "What one company HAS done!" by PCOJCT::MILBERG (SISsy is a really dumb job-title) Tue May 26 1992 11:30

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 Title:            ALLIED-SIGNAL Streamlines Into A Startling Turnaround 
 
 Source:           DOW JONES NEWS 
 
 Date Published:   20 MAY 1992 
 
 
 "You pinch yourself and ask: Is it the same Allied-Signal?" said Howard 
 Rubel, an analyst with C.J. Lawrence Inc. Less than a year since 
 Allied-Signal Inc.'s new chairman, Lawrence A. Bossidy, arrived, the 
 company has chalked up a startling turnaround, The Wall Street Journal 
 reported. The 1991 final quarter reversed three consecutive quarterly 
 earnings declines. This year's first quarter reversed a long trend of 
 negative cash flow. First-quarter operating margins rose to 6.6 percent 
 from 3 percent a year ago; return on equity doubled to 16.5 percent from 
 7.4 percent while profit more than doubled to $127 million, or 91 cents a 
 share, on a  sales gain of less than 3 percent. In fact, things are going 
 so well, Bossidy said in an interview, that he is already "considering a 
 dividend increase," perhaps as early as next year. He said the new dividend 
 would be "competitive" with those paid by companies Allied-Signal considers 
 rivals. 
 
 The automotive, aerospace, and engineered materials concern cut its 
 quarterly common stock dividend to 25 cents a share from 45 cents last 
 October, spelling cash savings of $140 million through the end of this 
 year. Bossidy declined to predict the level of any new dividend partly 
 because of the uncertain economic outlook. "I would rather pay dividends 
 from actual earnings rather than promised earnings," he said. No matter, 
 Wall Street is cheering. The price of Allied-Signal stock has nearly 
 doubled to $58.25 from $29.375  on June 26, 1991, the day before it was 
 announced that Bossidy would succeed Edward L. Hennessy Jr. In late trading 
 yesterday on the New York Stock Exchange, Allied shares were quoted at 
 $59.375, up 50 cents. Can this be real? After all, Bossidy, selected by 
 directors in a controversial search, is under pressure to show results. 
 
 "There's no way of verifying independently what they are telling us. On the 
 other hand, cash flow numbers show that it isn't all smoke and mirror," 
 says Katherine Stults, an analyst at Dean Witter Reynolds Inc., who has 
 followed the company since 1983. Indeed, there's no fancy footwork here, 
 analysts say. The company hasn't shed assets to pad the bottom line, nor 
 has it adopted new manufacturing techniques, or introduced new products. 
 Rather, it has pared management layers,  slashed inventory and consolidated 
 operations. "We always felt that the company had untapped reserves of 
 profit," says Stults. "All it needed was a better manager." Bossidy took 
 over a company based on a hodge-podge of acquisitions that had drawn 
 criticism of Hennessy for building an empire while losing sight of the 
 bottom line. To address the issue, Bossidy last October announced a 
 restructuring that set specific goals for 1994: an operating margin of 9 
 percent, a return on equity of 18 percent, and a positive cash flow of $350 
 million. 
 
 Commenting on the process so far, he said, "We are producing greater 
 savings than we anticipated and we are getting there faster," he said. As 
 for current operations, Bossidy said April order rates were "mixed." While 
 the second-quarter outlook for the company's automotive, chemical and 
 engineered materials businesses was "good," he said the aerospace market 
 "will have more difficult economic times" in the current period. "Things 
 are better, but we aren't prepared to say yet that an economic recovery, 
 without question, is under way," he said. Nevertheless, Bossidy said, 
 Allied-Signal expects to post per-share earnings of $3.60 to $3.85 for this 
 year, and $4.25 to $4.75 a share for 1993. 
                (c) Dow Jones News -- FOR INTERNAL USE ONLY 
 

    

    On a slightly different note, there was an article (i think it was in
    the Journal or the NY Times) about how GE develops its managers and how
    well they do when they head a company. The examples cited were
    Allied-Signal (Re: 0), Goodyear & Wang, all 3 are headed by former GE
    managers. This article, by the way, appeared almost 8-10 months ago.

	Now for some of the details on how Allied-Signal and subsidiaries
	are getting this extra profit...

	I used to work for the Bendix Field Engineering subsidiary, and
	my wife still does.  The corporation has increased profit by:

	- Reducing the quality of the medical plan.  To quote my ex-boss,
	  who had the same doctor as I did:

	  "The vet for my cat is next door to the doctor's office. She
	   gets better care, in better facilities, for less than we do."

	- All but eliminating sick leave.  No matter how many years you've
	  been with the company, you get 3 days of sick leave/year.  If
	  you're hourly, you can't even get comp time, meaning that you'll
	  probably work a few days without pay if you have a bad year.

	The list goes on.. but you get the idea.  That's a large part of
	the reason I left there.  Several others that I know of are also
	thinking about leaving because of these, and other, reasons. Most
	of these people are very good, and the company really can't afford
	for them to leave.  The long term result will probably be a loss
	of the better talent, which will be detrimental to the company in
	the long run.  If Digital was to use them as a model, there would
	probably a mass exodus of people for the same reasons. (I'd probably
	have to change companies again too...)
	  

One of our significant customers in the area are the various
parts of the former Bendix Corp and .2 pretty much covers how
much those people struggled with that company. I never heard alot
of personal things but ALOT read that all the marketable talent 
left years ago. Its not a pleasent place to work. The view I have
of a the various divisions is a company thats trying to make itself
look good short-term and nothing long-term. None of the kind of
talent and investment to have a future is there anymore. Remember there
were no SERPs or TFSOs there, they had whatever the state of Maryland
unemployment offered. Finally, I always enjoy using the "1983 William
Agee Memorial Urinal" whenever I go there on service calls.

Fred M.

    
    I got a chuckle when I read the base note.  Now after reading the three  
    replies, it's no longer funny.  This Bossidy must be a real
    illusionist.  Even a corporate analyst who has been watching this
    company for nine years is suspicious.  With terms like "smoke and
    mirror" and statements like, "there's no way of verifying indepen-
    dently what they are telling us," I'd say that Allied's investors
    are flying Instrument Flight Rules!
    
    /Mike
    

    Even IFR requires the use of instruments that give valid readings.

William Agee Memorial: I *hope* you are kidding!?! I'm not sure I would want to
be immortalized in porcelain.

.2>	- Reducing the quality of the medical plan.  
    
    Personally, I've found Digital has been doing that for the past two to
    three years.
    
    Too bad we don't show the same results for it as Bendix.