Jim Ling Forced Out

Well, one chief executive said to me that the chief executive does not like to lose his manhood. When his company is taken over, he's no longer the prominent man in his industry. He no longer calls the shots, and that's a terrible blow to people who have called the shots.

-James J. Ling

In a retrospective moment last fall, Dallas Entrepreneur James Ling was recalling a trying period in 1961 when he had temporarily been shunted aside as chief executive of his Ling-Temco-Vought, Inc. Conservative bankers had mistrusted the fast-moving Ling and chosen an older man. But Ling wasted little time in winning the bankers over and taking back his job. Last week one of the biggest and certainly the most daring of the conglomerate builders took the terrible blow again -from much the same source. At a four-hour emergency board meeting, called at the insistence of LTV's nervous bankers, Ling stepped down as chairman and chief executive in favor of Robert Stewart III, a corporate rescue expert who is chairman of the First National Bank in Dallas. Ling replaced Clyde Skeen as president of cash-strapped LTV, which had sales last year of $3.75 billion, and the company announced that Ling and Stewart will "share policymaking responsibilities." They are going to need all the policymaking skill they can muster, for rarely has so large a corporation been so close to financial disaster.

The Squeeze Worsens. Jim Ling, to be sure, has been gambling on vast success -or flamboyant failure -ever since 1946, when he began building a tiny electrical-contracting business into a huge conglomerate. He took his greatest risk in 1968 with the purchase of Jones & Laughlin Steel Corp., the sixth largest steel producer in the U.S. Using borrowed money, he paid too much for the company. He bought control for $85 a share, and since then J & L stock has plummeted to $12.75. There was little that Ling could do to stop the slide. A federal antitrust suit barred him from exercising his command.

To meet LTV's heavy interest charges on its $862 million debt, Ling was forced to sell off National Car Rental, Staco, Inc., Wilson Sporting Goods, Allied Radio and Whitehall Electronics, as well as most of the conglomerate's holdings in Computer Technology and some of its stock in Braniff Airways. Last week the cash squeeze got worse when Jones & Laughlin directors voted to omit the quarterly dividend -cutting off $4.2 million in income that LTV could have applied to its debts.

Up a Few Notches. That last setback only emphasized LTV's mounting difficulties. Early this year Troy V. Post, a Dallas insurance millionaire and longtime patron of Ling's, began agitating for a radical shake-up in the conglomerate. A collector of antique clocks as well as modern corporations, Post merged his holding company, Greatamerica Corp., with LTV in 1968. In return for their shares, Greatamerica stockholders got a package of LTV debentures and stock warrants; but each $1,000 debenture is now worth only $150. LTV's stock plunged from around $100 a share at the time of the acquisition to a low of $8.37 last week. Post put himself on the LTV board in February. When the first quarter ended with a $6.5 million loss and there was no turnaround in sight, Post's patience became shorter. Banker Stewart, 44, who was elected to the board just last month, joined with Post to force Ling's ouster.

"It was this simple," says one of the directors. "The first thing at the meeting, Bob Stewart got up and said he was speaking for all of the banks and lenders. They were so concerned over the situation and the outlook for the company that they insisted a change be made -that Stewart go in as chairman. Bob said that the banks had reached a point where they were ready to pull out -ready to recall their notes -if some big change weren't made immediately. Jim took it like a man and went up a few notches in my estimation."

Dallas Worries. Ling was not the only one to take a beating. Later in the meeting, a procession of vice presidents marched in, one by one, to share in the bitter medicine. Each announced how many people he had on his staff and how many he was going to fire. On the next day, 64 out of 160 headquarters staff members were dropped. LTV employs some 25,000 people in the Dallas area, and city fathers are frankly worried about the future of the company. In the last quarter of 1969, LTV Electrosystems laid off one-third of its 1,600 employees. In the past four months, LTV Aerospace has dropped 5,000 workers in Dallas.

The LTV board itself was pruned from 20 to 14 directors, and each of those remaining has or represents a direct investment in the company. For example, E. Grant Fitts, the president of Gulf Life Holding Co., is accountable to his stockholders for LTV securities that once had a value of some $34 million but are now worth only about $8.8 million. The word around headquarters last week was that Braniff Airways President Harding Lawrence, husband of Adwoman Mary Wells Lawrence, will be a powerful figure on the new LTV board.

Balky Judge. LTV must repay $55 million in interest to its banks next January and an equal amount next July; a primary problem of the new board is meeting those installments. Last week LTV announced that it expected to prepay up to $47 million of the debt "in the near future." The money will come from the sale of Wilson Sporting Goods, which was disposed of in February. Discussions have also been going on with several possible purchasers of Braniff Airways and Okonite Co., two sizable pieces of LTV that Ling agreed to sell in return for the Justice Department's withdrawal of its J & L antitrust suit. Those sales could be held up, however, by Federal Judge Louis Rosenberg, who will begin hearings next week in Pittsburgh to satisfy himself that the settlement will be in the public interest.

Ultimately, LTV may not survive; the possibility of its demise is openly discussed in Wall Street and Dallas. The low price of LTV's debentures indicates that many investors do not expect them to be paid off. If the 14th largest industrial company in the U.S. should go under, the real danger would be in the psychological shock on other conglomerates -as well as on the demoralized stock market and the nation's queasy economy.

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