The Powerhouse
(See Cover)
Amid the rolling hills of Vallecitos, Calif., the domed buildings stood bizarre and unexpected, like monstrous silver derbies tossed away by a giant. Even more bizarre was the scene inside. Over two pools of dark green water hovered a pair of white-clad men, intently fishing into the depths with a long grappling pole. Directed by a loudspeaker, they dipped again and again, snaring silver-colored bars of uranium 235 from the bottom of one pool and guiding them gently into the other. As they did, a gauge of amber-colored numbers shot up and up. Near by, another figure stood ready to halt the proceedings by pushing a button marked SCRAM. Directed the squawk box: "Insert H-6." As the last bar moved into place, an amber smear shot across the gauge, the radiation count soared to a million a second --and an atomic blaze sprang to life. Thus the nation's first large, privately owned test reactor, built by General Electric Co., went into operation last week.
General Electric's new $4 million, 30,000-kw. reactor is the latest step in U.S. industry's epic struggle to harness the atom for peacetime use. Already, the atom is a wonderful servant in many areas of U.S. life. Radioactive isotopes last year saved U.S. industry an estimated $500 million. More than 90% of all tire fabrics and 80% of all tin cans are tested with radioactive thickness gauges. Radioisotopes control quality in cigarettes, find leaks in pipelines, determine wear in metals. In more than 1,700 U.S. hospitals, radiation is used to diagnose disease, treat cancer and tumors, preserve tissue and blood vessels in banks. It has caused mutations in seeds that produce bigger and better crops, been used to destroy such longtime pests as the screwworm, preserved food indefinitely. Nuclear power is already propelling submarines.
But the challenge of the atom is as limitless as its accomplishments. Among the biggest challenges of the future is the channeling of the atom's awesome potential into commercial power.
Risk & Opportunity. The job is giant size--and a job for giants. Many an eager-beaver company found that out when it jumped into atomics in 1954 after the Government first permitted firms to own reactors, was forced to drop out in the face of expense and uncertainty. Today, the maturing U.S. atomics industry is made up of about 100 major Government and privately owned manufacturing and research organizations. They range from such small firms as Baird-Atomic, Inc. and Nuclear Science and Engineering, with only a few million dollars worth of business in supplying the major atomics firms, to such giants as Westinghouse and Du Pont, whose contracts run into hundreds of millions (see box). Several of them are ahead of G.E. in certain fields, but none have met the challenge of the atom on a broader front.
G.E. has the biggest stake in harnessing the atom for commercial use, simply because it is the biggest U.S. electrical firm and the world's biggest supplier of power equipment, concerned with power for everything from toasters to jet engines. Its stake has been defined in terms that every schoolboy can understand by G.E.'s chairman Ralph Jarron Cordiner, 58, a short (5 ft. 7 1/2 in.), power-packed man with restless eyes that are always trained on the future, ever watchful for risk and opportunity. Says Cordiner: "The atom is the power of the future--and power is the business of General Electric."
Ralph Cordiner has thrown all of G.E.'s energy and know-how into the atomic future. The company has $1.5 billion in Government contracts and more than $100 million in private contracts, has committed more men (14,000) to atomics, and spent more of its own money ($20 million) to build research facilities, than any other company. So far it has not made a dime on commercial business, but its hopes for the future are bright.
To get ready for that future, G.E. is engaged in more than 30 widely different atomic activities. Items:
P: At Vallecitos, G.E. built the nation's first privately owned and operated power reactor next to its new test reactor, which is used for testing fuel and materials for future power reactors. It is building the largest U.S. all-nuclear power station (cost: more than $45 million) at Dresden, Ohio for Commonwealth Edison of Chicago, and a $19.5 million reactor at Eureka, Calif, for Pacific Gas & Electric Co., has been selected to construct nuclear power stations in Switzerland, West Germany and Italy.
P: At Richland, Wash., G.E. operates the Government-owned Hanford plutonium works, where every year it produces isotopes with 140 times the radioactivity of the world supply of radium, is conducting radiation studies on plants and animals.
P: At Evendale, Ohio, G.E., the only company doing major work on the atomic-powered airplane, is going ahead at an $80 million-a-year clip in Government contracts. It has developed a direct-cycle engine (in which air is heated by direct contact with a nuclear reactor core), already successfully operated it on the ground.
P: At its Knolls Laboratories near Schenectady, N.Y., G.E. is designing a twin-reactor, pressurized-water system for the world's largest submarine, the U.S.S. Triton. It is building a reactor system for the Navy's first nuclear destroyer, studying a boiling-water reactor for use in a merchant ship.
Power by 1965. General Electric's latest and most controversial contribution to atomics is a plan for U.S. industry to produce competitive commercial atomic power without Government subsidy--and produce it by 1965, a good five years before most estimates. Cordiner believes that U.S. industry can do it without the massive Government aid ($2 billion so far) that has spurred atoms-for-peace to date. Says he: "The job of developing commercial atomic power should be left to private enterprise."
To push the Cordiner program, G.E. plans to enlist the aid of industry to build 25 small package reactor plants costing between $4,000,000 and $4,500,000 for delivery to private utilities beginning next year, and to construct five bigger development reactor plants for $128 million. Of the total, G.E. would put in $7,000,000 for research and development costs. Equally important, G.E. wants other companies, now working on at least a dozen different power reactors, to concentrate on the G.E.-developed boiling-water reactor, which G.E. claims is cheaper and more efficient than any other.* By thus concentrating industrial efforts, Cordiner argues that power competitive with the most expensive fossil fuel could be produced in six years.
Cordiner's plan has plenty of opposition. Says Atomic Energy Commissioner John A. McCone: "In this stage of the art, we cannot say which type reactor is best, or afford to place all our bets on one to the exclusion of the others." This month the AEC will present its own plan to Congress, with "some important additions to ensure the exploitation of several promising processes."
An even bigger objection to Cordiner's plan comes from New Mexico's Democratic Senator Clinton P. Anderson, chairman of the Joint Committee on Atomic
Energy. Says he: "Private firms cannot take the leadership in developing atomic power plants. It is too much of a task. The Government should see atomic power plants through the first two or three generations, and then private industry can take over." Private industry will not do the job quickly enough without Government aid, argues Anderson, because it has little incentive. The U.S. has plenty of oil and coal and water power for years to come, and U.S. conventional power is an average three times cheaper than the most efficient atomic power produced today. But many power-starved countries that have no fossil fuels are ripe for atomic power right now--and the U.S. must be able to supply them if it does not want to lose world leadership in atomic power.
The Gamble. To date, the Cordiner plan has had no takers. But Cordiner is convinced that industry will come around because it has already shown an amazing willingness to spend money on atomic power--more than $250 million since 1954--with no hope of profit for a decade. Eight power reactors have been built, all but G.E.'s subsidized by the Government. Fourteen more will be in operation by 1963--and only one will belong to the AEC. Four will be privately financed at a cost of $250 million, and the remaining ten will be built by private groups with some help from the AEC.
All the companies are risking more than money. They are using widely different reactors, none of which will produce power at commercially competitive costs. Eventually the AEC will decide on the most effective reactor, or reactors, on the basis of performance, and companies that have backed other systems will suffer a severe setback. G.E.'s Cordiner is gambling most of all. No one seriously expects him to get all that he wants--but if he gets only half, G.E. may accumulate so much experience that it will forge far ahead of the rest of the field.
Darling of the Funds. G.E. can well afford such gambles, thanks to its wide diversification, crack management and pioneering spirit. From a manufacturer of electric bulbs and dynamos only 66 years ago, it has burgeoned into a power giant that turns out more than 200,000 separate products in more than 170 plants in 31 states and several countries. Along the way, G.E.'s scientists and engineers did the work that led from Edison's lamp to the modern incandescent bulb and the science of electronics, developed the X-ray tube, became the first to seed clouds for weather control, created the world's first man-made diamonds. Today, its laboratories employ 20,000 scientists and engineers, busy delving into the fundamental aspects of matter and mechanics.
On Wall Street G.E. is the darling of the investment funds because in good times and bad, its diversification has enabled it to turn a profit every year in its history. This year, despite the recession and the expenses of pioneering nuclear power, G.E.'s earnings turned up 6% in the third quarter to $58,589,000, for a nine-month total of $161,970,000 on sales of $3 billion. A boom in the generating-equipment segment helped level out a slump in appliances; the recovery of appliances, now under way, is expected to cut losses when heavy apparatus orders drop off. G.E. stock, selling at 78 3/4 at week's end, has been setting new highs week by week.
G.E. spreads its influence far beyond industry and finance. It employs more people (about 260,000) than the population of all but 40 U.S. cities, is the economic and often the social center of dozens of "company towns" where "the G.E." is more important than city hall; it maintains company schools with more students (32,000) than most U.S. universities. Cordiner headed the committee that produced the "Cordiner Report" recommending an Atomic Age army that would be small, highly paid and highly mobile. He has also brought his weight to bear on local and national politics, recently visited several states to support right-to-work laws. He has set up one of the biggest and most aggressive lobbying offices in Washington, encourages G.E.'s executives to push company causes by entering politics and community life. When it comes to comparing businessmen with politicians, Cordiner will "take my chance on a businessman every time." Says he: "I'd say that only 20% of politicians are really dedicated."
Organization Man. Keeping this computer-complex corporation humming is a job for a human powerhouse--and Cordiner fits the bill. From his three-room suite at Manhattan's Carlton House he arrives in his modest. 45th-floor office in Manhattan's gilt and gaudy G.E. Building between 7:45 and 8 each morning, the day's newspapers already read. Working on a schedule as accurate as an electronic timer, he tackles a pile of selected correspondence immediately, begins dictating letters and memos almost as soon as his secretary steps in the door at 9,
He never stops his headlong pace to speak or idle with his office staff, lunches hurriedly in the executive dining room before closeting himself for the afternoon with executives to discuss problems ("Let's start from the Garden of Eden and work this through"). Each evening he takes home a portfolio of work--and expects other G.E. executives to do the same.
G.E. is widely considered one of the chief strongholds of the organization man. Ralph Cordiner is an organization man with a vital difference: he has made the organization conform to him. ''When I took over in 1951,'' he recalls, "I told lots of people immediately that this company was not going to be a sinecure for mediocrity. The old G.E. had a reputation as a good and complacent place to work if you kept your nose clean. I wanted to get rid of that idea and create more risk and opportunity." Says G.E. Director and Wall Street Broker Sidney Weinberg: "If you did something wrong, Cordiner would send for you and tell you you were through. That's all there would be to it."
The Big Split. To get G.E. in shape for risk and opportunity, Cordiner put through one of the most thorough management revolutions in the history of U.S. industry. "American business," he says, "spends too much time on thinking about this month, this year. It ought to spend more time preparing for 15 to 20 years from now--the next business generation." Another Cordiner complaint: business is so big that individual initiative is often stifled. Men who once would have been bosses of their own companies have too little chance in a corporation to run their own shows. Cordiner's answer to both problems: massive decentralization.
G.E. was broad and unwieldy after a decade of tremendous wartime and postwar growth. Cordiner split it into 27 autonomous divisions containing no small companies just the size "for one man to get his arms around." The head of each company is the boss, just as if he were running his own company. Within a loose framework of policy, he makes day-today decisions, sets his own budget, raises or lowers prices, sets up his own design and marketing policies, even makes capital expenditures up to $200,000.
Under this system, division heads and Cordiner himself are "freed up"--Cordiner's favorite expression--to concentrate on long-range planning. Gone are assistants, coordinators and committees. Says Cordiner: "G.E. has no place for committees as decision-making bodies. A committee moves at the speed of its least informed member and too often is used as a way of sharing irresponsibility."
Cordiner shares his responsibilities with an executive office composed of President Robert Paxton, 56, and 13 vice presidents. The heads of the nine service divisions (e.g., accounting, management consultation, marketing) report directly to Cordiner, bear the chief burden of long-range planning and research. To Paxton, himself an old operating man, report such operating-group executives as Arthur F. Vinson. 51, head of G.E.'s important heavy industrial goods section, James H. Goss, 51, head of consumer products, and Cramer V. LaPierre, 54, boss of defense and atomics.
No Yes Men. Few of G.E.'s management trainees would recognize in Cordiner the image of the successful executive they aspire--and are taught--to be. Cordiner thinks the world is moved by men of independent thought ("I have a strong aversion to yes men"), has strong convictions on virtually everything from politics (far to the right) to television ("We are in danger of becoming a nation of watchers instead of doers"). He has been married for 33 years, lives a Spartan life in which he drinks little (a few Scotches now and then), eats little (no desserts, frequent salads and sandwiches), sleeps little (average: six hours), generally avoids social contacts with company people--and, for that matter, with just about everyone but his own family (four married daughters, ten grandchildren).
Cordiner's carefully regulated, jam-packed life, relieved occasionally by golf (low 80s) or deep-sea fishing, is the product of a near obsession about time--the "fourth dimension in a corporation--beyond men, money and materials." When a G.E. executive recently suggested a 1963 deadline for a project, Cordiner asked for 1959. Says he: "That way we stand a good chance of getting it by 1961. Otherwise, we might get it in 1965."
Cordiner will not have to retire until 1965, but he has planned his retirement as carefully as G.E.'s future (friends are convinced he has the date and hour marked on his calendar right now). Four years ago he bought a cattle ranch on Florida's west coast to prepare for his retirement. There, on 1,820 acres, he has set up "decentralization on the farm," intends to build a "Cordiner Motel" some distance away for his visiting daughters and their families, under his longtime policy of "decentralization in the home."
Layers of Fat. Ralph Cordiner has always made good use of his time. He was born in 1900 on his father's 1,280-acre wheat farm near Walla Walla, Wash., just eight years after a genial Quaker named Charles A. Coffin merged two electrical firms to found General Electric. Cordiner went to small Whitman College, where he worked his way through school by doing odd jobs and selling wooden-paddle washing machines for the Pacific Power & Light Co. He went to work for Pacific Power after graduation, became such a star salesman that he was soon lured away by the Edison General Electric Appliance Co. Edison was a subsidiary of General Electric, then under its third president, brilliant, public-minded Gerard Swope, who kept the company reins firmly in his own hands. Cordiner celebrated his new job by marrying his college sweetheart. Gwyneth Lewis.
He was made head of the northeast office in 1928, moved past 16 men to become Pacific Coast manager in 1930, soon chose to transfer to G.E.'s new merchandising department in Bridgeport, Conn, to "get closer to the hub of the corporate wheel." He hiked sales in the electric heating division 60% in four years, became assistant to Bridgeport Boss Charles E. Wilson. When "Electric Charlie" Wilson moved up to become executive vice president of G.E., Ralph Cordiner stepped into his shoes at Bridgeport. He was only 38.
But even this fast rise did not satisfy him. With his ideas about management reform already forming, he could not put them into effect in the centralized G.E. organization. Says T. K. Quinn, author (I Quit Monster Business) and onetime G.E. vice president, who helped Cordiner up the ladder: "He was outspokenly sour on G.E. He referred to the layers of fat in the company that smothered talent like his. The fat was anybody above him."
One Job, One Man. Cordiner left G.E. in 1939 to become president of ailing Schick Inc. He put the company back on its feet and was growing restless when he got a call in 1942 from Old Boss Charlie Wilson, who had taken leave as G.E. president to head the War Production Board. Wilson asked Cordiner to come to Washington. Cordiner stayed about a year, returned to G.E. as personal assistant to Gerard Swope, back from retirement during Wilson's absence.
When Wilson returned to his desk to lead G.E. into its tremendous postwar expansion, he gave Cordiner his blessing to work on decentralization plans. For five years Cordiner labored. When Wilson resigned in December 1950 to go back to Washington during the Korean war, Cordiner was ready. He was the only candidate presented by Wilson to the board. "In this big company," asked Director Sidney Weinberg, "don't we have any other man?" Replied Wilson: "Why do you need more than one?"
Within days after he took office, Cordiner's pent-up frustrations of years exploded into action. He called together 50 top G.E. executives, laid out the whole grand design of decentralization. So shocked were G.E.'s executives by the swiftness of his move that G.E. Board Chairman Philip A. Reed got to his feet to relieve the tension. He told the story, appropriate to the moment, of the little girl who began making a picture of God. Said her mother: "Honey, God is a spirit and no one knows what he looks like." Replied the little girl: "They will when I finish."
Into the Southeast. One of the biggest upheavals of Cordiner's revolution was a major shift in G.E.'s plant location. Cordiner's policy is that G.E. should not employ more than 12% of a city's labor force; he saw that future expansion would require far more than this in many towns. So G.E. set up satellite plants within 100 miles of many of its older plants, moved other divisions away from the traditional industrial belt and into the southeast, where G.E. now has 19 plants employing 30,000 workers. Old company towns were hard hit by the shift (3,500 fewer workers at Lynn, Mass, alone in the first year), and long-entrenched executives were uprooted. Cordiner has spent $1.2 billion on capital expansion, including $500 million for a three-year program launched in 1955. Chief accomplishment: $200 million Appliance Park in Louisville, Ky., a highly automated industrial city where each appliance has its own plant and management. Appliance Park now has 11,000 employees and a yearly payroll of $63 million, is Kentucky's biggest industry.
To avoid "creeping recentralization," G.E. now puts more stress on management training than ever before. At G.E.'s three-year-old, $2,000,000 advanced management center on 27 acres at Crotonville, N.Y., doctors in psychology, sociology, even anthropology, teach executives the demands and duties of the management revolution. Says Cordiner: "Today's manager is a man whose task is completely saturated with human relations."
Boulwarism. G.E.'s biggest and most controversial human-relations problem is unions. The company's early labor policies were so liberal (health programs in 1907, pensions in 1912, one of industry's first profit-sharing plans in 1934) that they were considered pink-tinged. But after strike-ridden 1946, G.E. took a hard look at its labor policy and decided to make some changes.
G.E.'s labor policy since then has been termed "Boulwarism," after G.E. Vice President Lemuel R. Boulware--but it could just as well be called "Cordinerism." Cordiner recruited Boulware in 1947 to work out a new labor policy, and has backed him to the hilt. Boulware's new labor line took the salesman's view that the laborer is a customer who has to be sold a product (labor contract)--and that the union is a competitor. He launched a steady barrage of propaganda aimed at winning the worker, used speeches, plant publications, community relations to attack overweening union power, took a tough stand at the negotiating table. Last year Boulware was moved toward retirement into a consultant's post, but, snaps Cordiner, showing a rare flash of anger: "There's been no change in policy."
G.E.'s labor policy has been widely attacked as cynical and paternalistic. It has also been criticized because the company failed to make a distinction between the Communist-dominated United Electrical Workers and the vigilantly anti-Communist International Union of Electrical Workers when the two were battling for the legal right to represent G.E. workers in 1950. But G.E.'s policy has also picked up its admirers as an effective means of meeting union power. G.E. has had far less time lost by strikes than rival Westinghouse, which was tied up for months by a strike in 1956. Appliance Park was called "Cordiner's Folly" by industry leaders, who felt that a strike would tie up all his appliances. That has not happened so far. Last September, when G.E.'s 70,000-member I.U.E. tried to call a strike during contract negotiations, it could not get the necessary two-thirds vote. But I.U.E. Boss Jim Carey has got the union to change the two-thirds provision of its constitution, and the company is bracing for another strike threat in February.
Jet Pioneer. Many of G.E.'s products seem to have little relation to one another, but the kinship is close. Since G.E.'s basic business is turbines, moving into jets only meant using turbines in a different system. G.E. built the engine for the first U.S. jet fighter in 1942, has done so much jet work that today it is ranked with Pratt & Whitney as the top jet producer. During the Korean war, 60% of all the jets in service had G.E. engines. The company powered the world's first Mach 2 bomber (Convair 6-58) and the world's first Mach 2 operational fighter (Lockheed F-IO4A Starfight-er). Its jet engines are scheduled to power the world's fastest commercial jetliner (Convair 880) and the first Mach 3 military aircraft (North American 6-70 and F-108). Far less spectacular, but of wide-reaching importance, is G.E.'s pioneering of the small jet engine, which may eventually bring the jet age to the nation's smallest airports.
From jet development G.E. stepped logically into missiles, has pushed ahead to second place (after General Dynamics) in total defense work. Hardly a missile rises from its pad that does not contain some G.E. part. G.E. is working on problems of re-entry for the Atlas and Thor missiles, on fire control and guidance for the Polaris, Sidewinder and Tartar, has armed and fused the warhead for the Army's Corporal, Honest John and Nike Hercules missiles.
Happy Fault. In atomics, G.E. got a head start in 1946, when it took over operation of the Hanford works from Du Pont. As early as 1946 it proposed the idea of a nuclear submarine, but the demobilizing Navy was in no position to make a decision then. G.E. developed a sodium-cooled reactor that eventually went into the atomic submarine Seawolf. But it proved less satisfactory than the pressurized-water reactor developed by Westinghouse, which has since concentrated on submarine propulsion, moved out well ahead of G.E. in this field.
Actually, G.E.'s initial failure worked to its advantage, gave it impetus to branch into fields largely ignored by other firms. It is already looking beyond atomic power by fission to the more revolutionary power of fusion--releasing energy by fusing together the nuclei of two atoms. Fusion, the energy that lights the stars, could provide man with virtually unlimited power. But no one will know whether fusion research is a success or failure for another three or four years, and any practical results will come years after that. Nonetheless, a company such as G.E. must commit itself to these grandiose projects, with no guarantee of success, if it hopes to survive another generation of doing profitable business. That fits in perfectly with Ralph Cordiner's concept of G.E. as a company of risk and opportunity. Says he: "Civilization is moved forward by restless people, not by those who are satisfied by things as they are."
* G.E.'s claims for the boiling-water reactor got backing from a seven-man team of international nuclear experts sponsored by the World Bank and the Italian government, which selected G.E.'s reactor for an Italian plant from among nine proposals from four countries.
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