Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 28, 1993 TAG: 9303260164
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: DANIEL HOWES
DATELINE: LENGTH: Long
Signals of coming change have been mounting for several months, but it took a vaguely-worded statement a few weeks back to confirm new resolve in corporate thinking: The losses have got to stop.
R. Alan Brogan, a Norfolk and Western Railway Co. veteran who's seen several promotions in the past couple years, was tapped by Chairman David Goode to rescue the Indiana-based trucking unit.
Joseph Ruffolo, the North American man who served as president of the trucking concern, has been named a full-time consultant - no surprise to stock analysts who in January attended Norfolk Southern's quarterly meeting in New York and noted Ruffolo's conspicuous absence.
Consider what they heard:
First the customary introductions of Norfolk Southern's "senior management team," with Goode making sure to introduce Brogan as - then - the company's newest executive vice president in charge of transportation logistics.
Based in Fort Wayne, Ind., where North American has its headquarters, Brogan "oversees all of our logistic activities, including North American Van Lines," Goode said, according to a transcript of the Jan. 27 meeting. "Alan is leading a new team committed to producing improved results."
After blaming the company's 9 percent earnings decline - from a $1 per share in 1991 to 91 cents per share in 1992 - on North American's performance, Goode delivered this nugget:
"As you know, Alan Brogan has been assigned to lead NAVL's management. I have a lot of confidence in Alan and have given him the charge of making whatever changes are necessary to improve performance at NAVL and to integrate business opportunities of NAVL more fully with NS strategy."
"We are committed," Goode continued, "to take the steps necessary to produce improved performance at North American."
No hidden agendas there, it would seem.
"NAVL has been a thorn in their side and they haven't been able to turn the company around," said an analyst who's been watching the company for several years. "They haven't really lost anything, but they haven't made money, either."
However you slice it, analysts said, NAVL's performance since joining the Norfolk Southern fold has been disappointing. Eight years ago, the company paid $369 million for the motor carrier and its German subsidiary, Midi-Data Transport.
The trucking unit's operating ratio - a key statistic in the transportation business that measures a company's efficiency - has been poor. And that's especially galling to the Norfolk Southern brass, whose company is considered perhaps the most cost-conscious and efficient player in the railroad industry.
In 1989, North American's operating ratio was 100.5, meaning the unit spent slightly more than it took in. In 1990, the ratio rose to 101; in 1991, it slid back to 0.99; last year, a one-time $27 million charge helped push the ratio back up to 104.8, according to company figures.
"It's not a huge drag on their earnings or the stock price," said an analyst who asked not to be identified. Last week Norfolk Southern's stock was trading at about $64 a share.
"If they announced they were going to dispose of NAVL tomorrow, how would the stock react? I don't think it would really at all. If Norfolk [Southern] does turn it around, it'd probably be worth $2 to $3 in their stock price."
That seems to be Goode's intention, Norfolk Southern watchers suspect.
Selling a trucking company that's proven a sop to an otherwise lean company's earnings could prove a dicey proposition, analysts said. More likely: breaking the company into pieces, selling some (like the home-moving operations) and retaining others (like utilizing trucking expertise to improve Norfolk Southern's burgeoning intermodal operations).
But it's not at all clear, analysts said last week, that Goode and his lieutenants are positioning North American in order to sell it.
A few other developments on the Goode watch, now about seven months old:
The company intends to open a one-person investor relations department later this week. The operation, to be headed by public relations veteran Deborah Noxon, will maintain contacts with financial analysts and institutional investors.
For years, investor relations has been the province of Chief Financial Officer John Turbyfill, who gets high marks from analysts for being accessible and accommodating - often to the point of directing specific questions to appropriate departments and officers.
The new investor relations office, set to open April 1, sprang from a months-long quality improvement study commissioned by Turbyfill. The charge: Determine if Norfolk Southern needs an investor relations office and, if so, draft a proposal.
For those who monitor such things, the Roanoke Valley now has its third Norfolk Southern vice president - and only the second female VP in the company.
Kathryn McQuade, who worked for Goode when he headed the company's tax department, now is vice president for internal audit. She joins William Bales, head of the coal and ore traffic department, and Donald Mayberry, vice president-mechanical, as the corporation's highest ranking officers in Roanoke.
Daniel Howes writes about business and political issues for the Roanoke Times & World-News.
by CNB