Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 22, 1992 TAG: 9203200108
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: BARNABY J. FEDER
DATELINE: LENGTH: Long
Companies that hire GE executives usually get managers who have experience running businesses that would be among the nation's largest companies if they were independent.
Most have also been through GE's widely admired management training courses and have absorbed GE's global perspective.
"It takes a special leader to rise to the top of GE, or near it," said Howard Rubel, an analyst who follows the company for C.J. Lawrence. "Anyone who gets there has faced a host of demanding circumstances and has seen more than one industry."
Analysts call the good fortune that often follows GE executives to other companies the halo effect, and it has been particularly strong in the last year.
In June, when Allied-Signal Inc. announced that Lawrence A. Bossidy, GE's co-vice chairman, would replace Edward Hennessy as chief executive, the company's share price immediately jumped 13 percent, to $29.375. Bossidy joined Allied-Signal less than a month after one of GE's best-known alumni, Stanley Gault, took over at Goodyear Tire and Rubber Co.
Gault, who had risen to be head all of GE's industrial products businesses, left in 1980 to manage Rubbermaid Inc., the rubber-products company in Wooster, Ohio, that his father co-founded.
By the time he left Rubbermaid for Goodyear, sales had jumped to more than $1.5 billion from about $300 million, and earnings had grown even faster.
Goodyear's stock was already up to $28, from a low of $17, when Gault arrived, and the share price jumped $3 when his appointment was announced.
"Gault has brought a new marketing focus, as opposed to production focus, to Goodyear," said Saul Ludwig, who follows the company in Cleveland for Roulston & Co. "And he's convinced employees at all levels that they are on a winning team."
Just as impressive is what Glen Hiner has delivered to shareholders of Owens-Corning Fiberglas Corp. since moving there at the end of December from his position as head of GE Plastics.
Shares of Owens-Corning Fiberglas, based in Toledo, Ohio, rose $2.25, to $23.25, on the day Hiner's appointment was announced.
Wall Street liked Hiner's effort to put the asbestos problem aside so much that it ignored lower-than-expected quarterly earnings announced the same day.
Old-line industrial companies are not the only ones that seem to respond to the GE touch. Roger Schipke, the top GE appliance executive when he left in 1990 after 29 years, became chief executive of Ryland Group Inc., a home-building company in Columbia, Md., after a short transition period as president.
Despite the recession in the housing industry, Ryland's shares have risen to $26.50 from $15.25 on Dec. 18, 1990, the day before Schipke's appointment was announced.
Analysts said that Ryland was a well-managed company before Schipke arrived, but that it has benefitted from the global perspective he brought from GE by winning its first international contracts.
What other companies would make up a mutual fund of those led by former GE executives? General Dynamics (William Anders); Wang Laboratories (Richard Miller); Sundstrand (Harry C. Stonecipher); Rubbermaid (Walter Williams); M/A-Com (Thomas A. Vanderslice), USF&G (Norman P. Blake Jr.); Zurn Industries (George Schofield); Clean Harbors (Clyde Keaton) and Systems and Computer Technology (Michael J. Emmi).
Many of these companies enjoyed healthy stock gains in the early months after former GE executives took control.
Sundstrand Corp., an aircraft and components maker based in Rockford, Ill., rose 60 percent in the first seven months after promoting Stonecipher from president to chief executive in 1989. He had joined Sundstrand two years earlier after 26 years with GE.
Zurn Industries Inc., a manufacturer of pollution control equipment, rose more than 34 percent in Schofield's first six months as chief executive in the latter half of 1985.
USF&G Corp., a deeply troubled insurance company, climbed from $7.875 when Blake took over on Nov. 26, 1990, to $12.50 the following April.
But the record is not perfect. M/A-Com Inc., a military electronics concern in Burlington, Mass., saw its stock fall during the early months of Vanderslice's control.
So did Clean Harbors Inc., an environmental cleanup company in Quincy, Mass., when Keaton began serving as co-chief executive.
And the stocks of companies led by former GE executives have not always sustained their gains. "You don't turn insurance companies around overnight," said Myron Picoult, who follows insurance stocks for Oppenheimer & Son. "It could take 10 years. I'm urging investors to steer clear of USF&G."
What about GE itself? The stock of the conglomerate, based in Fairfield, Conn., recently was at $77.50, a far cry from about $14, adjusted for splits, when John Welch Jr. became chief executive on April 1, 1981. The annual rate of return, including dividends, averages out to more than 15 percent.
Still, GE shares have underperformed the market since the beginning of this year and trade at about a 30 percent discount to the Standard & Poor's index of 500 major stocks, based on the ratio of price to projected earnings.
Many analysts now rate the company as an undervalued buy, especially for long-term investors.
by CNB