The Companies

By Stephen Koepp

Like dieters, corporations always launch into restructuring programs with grand hopes. But the speediness of the results ranges widely, as illustrated by two giant Midwestern companies that have gone through drastic reorganizations. While a streamlining program enabled Control Data, the computer maker, to bounce back from near bankruptcy faster than almost anyone expected, a similar process at Firestone Tire & Rubber has proved frustratingly slow in restoring the company's vigor. Their stories:

A COMPUTER FIRM REBOUNDS

Little more than a year ago, Control Data looked like a high-tech has-been. The Minneapolis-based company was piling up a staggering 1985 loss of more than $567 million (revenues that year: $3.7 billion). Bankers were refusing to extend the company any more short-term credit, while Wall Streeters were whispering that the firm might have to seek Chapter 11 protection. But today Control Data is running smoothly again, thanks to an overhaul in which the company dumped unprofitable sidelines, sharpened its focus on computer technology and cut its payroll from 54,000 at the end of 1984 to 34,000 in 1986. "This is one of the most dramatic turnarounds that I've ever seen," boasts John Buckner, Control Data's chief financial officer.

Control Data got into trouble by developing "corpocracy," or corporate bloat, at a relatively early age. William Norris, a former Sperry Rand general manager who started the company in 1957, had managed by the early 1960s -- with a staff of only a few thousand employees -- to take the industry lead in building high-speed computers for scientists and engineers. But as the company grew and prospered during the 1970s, the founder's interests began to wander toward wide-ranging and public-spirited ventures that diverted money and managerial attention. The company built factories in low-income regions like Appalachia, tried to develop a technique for farming in rural Alaska, and ventured into insurance and consumer finance, among dozens of other pursuits.

Control Data could afford to support its social conscience during good times, but when the computer industry slumped in the early 1980s, the company nearly collapsed from the weight of its commitments. Control Data's distracted managers were neglecting the firm's core technologies, like data-storage devices, while competitors raced ahead. The company's worldwide share of the market for disk drives reportedly plunged from 55% in 1980 to about 20% in 1985. The computer maker feverishly began cleaning house in 1985, not long before its financial squeeze. The company proceeded to discard some 20 businesses that were too far removed from its basic field. The biggest divestiture came last October, when Control Data sold off 80% of its Commercial Credit subsidiary, a financial-services firm, for $523.9 million.

Control Data's massive layoffs created culture shock for employees because the company had been so progressive in its benefits, including day care and family counseling. The remaining employees gamely cheered one another by wearing buttons that read IT'S O.K. TO SMILE. One of the thousands who left their jobs was Norris, who gave up the chairman's post in January 1986 at age 74 to let his successor Robert Price have a freer hand in dismantling the founder's overgrown dream.

But Price's narrower vision is starting to produce what Control Data needs most at the moment: profits. The company is now more focused on what it knows best, computers, just in time to take advantage of an upturn in that business. Indeed, analysts expect Control Data to show a profit as high as $80 million for 1987, compared with a loss of $264.5 million last year.

A TIREMAKER LAGS

Back in 1980, years before restructuring was a corporate buzz word, Firestone was practically inventing the idea. Unfortunately, the company is still working at it. Of Firestone's 17 North American tire plants, it has closed nine and sold another; the company has also slashed its payroll from 107,000 workers to 55,000. Yet the tiremaker's financial comeback remains around the corner. During fiscal 1986, which ended in October, Firestone posted $3.5 billion in sales but managed to earn only $3 million from its continuing operations. The company's chairman, John Nevin, admits that restructuring has ( an element of trial and error. Says he: "Have we done some things wrong? You bet your life we did."

When Nevin arrived at the company in late 1979 from the chairman's job at Zenith, Akron-based Firestone was reeling under more than $1 billion in debt and an image problem in its most basic business. The company had been forced to recall some 9 million of its 500-model steel-belted radial tires because of alleged widespread defects. Nevin's strategy was to return Firestone's focus to tiremaking by spinning off distracting subsidiaries. He sold eleven businesses that manufactured dozens of items, from seat belts to beer kegs. Such products now constitute only 9% of the company's sales, down from 26% in 1979.

But difficult conditions in the tire market have given Firestone poor traction for making progress. The market has not only grown smaller -- the result of today's long-lasting radial tires -- but more competitive. Prices have fallen because of rising production by foreign rivals, notably France's Michelin and Japan's Bridgestone. At the same time, Goodyear and other U.S. rubber giants are also revamping themselves and boosting their commitment to tiremaking.

So far, Firestone's restructuring, while reducing its debt load, has failed to improve its standing in the market. The company's sales have shrunk by one- third since 1979, and its position in the worldwide business has fallen from No. 2 to No. 3. Firestone can only hope that as the first to slim down, it may also be the first to enjoy fully the benefits of greater efficiency and lower costs. Says Nevin: "The pruning we've done is pretty severe, but this company is beginning to grow again."

With reporting by Marc Hequet/Minneapolis and Ken Myers/Akron