Bid and Lost

The six-month struggle by Chicago's Northwest Industries to take over the B.F. Goodrich Co. has long since won wide recognition as a classic display of corporate attack and counterattack. The aftermath of Northwest's unsuccessful campaign, which ended last summer, is becoming a textbook case in its own right. Keenly sensitive to Northwest's charges of poor management performance, the Akron rubber company has undergone an extensive purge in its white-collar ranks (TIME, Dec. 26). Now Northwest is beginning to show some managerial fissures of its own.

Nobody at the losing conglomerate lost quite so much as Chairman Howard A. Newman, 48, who last week flew to Barbados for a rest after abruptly resigning his $175,000-a-year job. Newman had joined energetic President Ben Heineman at Northwest 20 months ago, when Heineman acquired Philadelphia & Reading Corp., a Pennsylvania holding company. Over the past decade, Newman and his father had built P. & R. from a languid coal concern to what Newman calls "one helluva property" in underwear, cowboy boots and steel as well as coal. After the acquisition, Newman kept his office in New York, where he hoped to direct an acquisition program that would turn Northwest into a more prosperous property.

After unsuccessful passes at Swift & Co. and Home Insurance, the ambitious Newman persuaded Heineman to assault Goodrich. The adventure turned out to be costly as well as unavailing. Since it reached a high of 61 last year, Northwest stock has fallen to 13, a drop of 79%. The plunge has cost Newman a personal paper loss of $6.6 million. Why leave, with so much at stake in Northwest? Newman said that he wanted to take advantage of some "tantalizing situations" outside Northwest, but insiders say that he was simply "not having much fun" at the company after things turned sour.

Paper Losses. Northwest's current situation is more agonizing than tantalizing. The company still has its 16% interest in Goodrich, but all it has to show so far for that is a sizable paper loss. Legal fees and other campaign costs drained away another $3 million. A strike at Northwest's Lone Star Steel Co. and continuing problems--short hauls, frustrated merger plans--at its Chicago & North Western Railway have also helped to cripple profits. In the first nine months of the year, pretax earnings fell to $11.6 million--a 72% decline.

To a slightly smaller degree, Northwest's problems are shared by many other once glamorous conglomerates. Few are still able to increase their earnings at previous rates, several show declining profits and nearly all are in stock market trouble. Disillusionment has spread, as doubts have risen over their debatable accounting practices, and as the fight against inflation has raised the cost of their favorite business tool: borrowed money.

At James Ling's LTV, once the archetype of the successful multimarket company, problems at steelmaking and other subsidiaries lowered earnings in the first nine months of 1969. LTV stock is off 70% from its 1969 high of 98. General Host, the Manhattan conglomerate that won control of Armour & Co. last February, lost $1,025,000 in its latest reported six months of operations; the company's shares have fallen to 14 from a 1969 high of 42. Many stock analysts believe that conglomerates must regain a lot of investor confidence if they expect to share in the next market upswing.

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