The Problems of Westinghouse

Said a top Chicago retailer: "The trouble with Westinghouse is that it isn't anywhere near aggressive enough. It's not on the ball." Last week there were plenty of signs that Westinghouse, the 13th-biggest U.S. corporation, was not on the ball. In a year when most big corporations were reporting record earnings, Westinghouse sales were down 7% in the first six months and profits down a big 35% (Chief competitor General Electric had 5% sales rise in the first six months and a 9% profit increase.) For the third quarter, Westinghouse profits were estimated at 85¢ to 90¢ a share, compared to $1.04 last year, while the company's profits for the full year are expected to be well under $4 a share—the lowest since 1948 and a sharp drop from last years $5.06. As a result, the price of Westinghouse stock has dropped steadily from a bull-market high of 83 to the year's low of 55⅜.

Next week Westinghouse faces more trouble. A House Military Operations subcommittee opens public hearings into the costly fiasco of the Navy's Demon fighters, which were powered by Westinghouse engines. Five of these swept-wing fighters made by St. Louis' McDonnell Aircraft Corp., have crashed; 21 others are lined up at St. Louis' Municipal Airport and will never fly; they will be used instead for research and mechanics' training. The remaining 29 that were made will require new jet engines, to be supplied by General Motors' Allison division, before they can be put into service. The Navy indicated that the failure of the building program was chiefly due to the fact that the Westinghouse engines were subject to breakdowns" and their "power was insufficient."

Engine Flop. Westinghouse denied that engine failure was responsible for any of he crashes. But it did admit that it had failed to supply the Navy with the kind of engine the Navy expected. Back in 1948, the Navy gave Westinghouse a contract to perfect a more powerful model of the J40 jet engine, which Westinghouse was then developing. The improved model was to go into the Demon fighters. But Westinghouse ran into a multitude of troubles. It lacked the engineers and experimental facilities to develop the engine which proved full of bugs, e.g., excessive fuel consumption. As a stopgap, when the Navy was desperately in need of jet fighters for the Korean war, the J40 was installed in the Demon fighters. But finally, when development of the new model fell behind schedule, the Navy canceled the contract.

The Westinghouse engine flop crippled more than the Demon program. Five other Navy planes, which had been designed to take Westinghouse engines, were canceled, redesigned or delayed. Resulting loss to the Government: upwards of $100 million. The flop cost Westinghouse all its Government jet contracts, millions in potential profits and a big chunk of prestige.

Behind the Competition? Westinghouse has other difficulties, notably in appliances and heavy industrial equipment, the two divisions which traditionally account for over three-fourths of the company sales.