Paying the Pied Piper

By Marshall Loeb

LING by STANLEY H. BROWN 308 pages. Atheneum. $7.95.

With his nimble mind and ability to manipulate numbers, he might have become a nuclear physicist or a chess master. Instead, James Joseph Ling became the quintessential conglomerator. In the roaring '60s he created a company that eventually ran up sales of $3.75 billion a year from products as diverse as jet planes and hamburgers. By 1969, Ling-Temco-Vought of Dallas was the 14th largest industrial enterprise in the U.S. In 1970, with LTV stock crashing and bankers hounding him for huge debts, Ling's own directors booted him out.

That story is already legendary. But Stanley Brown, a former FORTUNE writer, retells it knowingly and with absorbing elaborations. His book is also a good document of business excesses in those heady years, when the market was climbing to the skies and everybody was dazzled by entrepreneurs with "vision."

Ling, who had made it out of dirt-poor Oklahoma roots to build a successful electronics company, had enough vision for everybody. Other men had swapped complex packages of securities in their companies to stitch together glorious empires. Ling could do all that and make it sound different and better. When making presentations to potential merger partners, he would take a piece of chalk or a felt pen and sketch marvelous projections of future earnings. He sounded like a cross between an evangelist and Univac. Not even the financial experts fully grasped how Ling intended to meet his predictions, but they were eager to advance him money. They wanted to believe.

Next Bargain. When Ling bought up companies at low prices, however, few of his shareholders stopped to ponder that he could get them cheap precisely because they had ponderous problems. Hoping both to solve those problems and raise more and more cash, Ling sliced up the major parts of his empire, creating smaller companies. (When he cut Wilson & Co. into separate meatpacking, sporting-goods and drug firms, brokers dubbed them "meat ball, golf ball and goof ball.") The plan was to sell new shares in these companies to the public, as well as to give plenty of options to their officers as an incentive. But, like most conglomerators, Ling was so busy looking for the next bargain that he had little time to check up on what he had already bought. He left operations largely to lieutenants, some of whom were not up to the job.

Working with projections from his subsidiary managers, Ling as late as the autumn of 1969 had been led to believe that LTV year-end earnings would be $40 million or more; they came out at just $2,000,000--a miscalculation of 2,000%. "The terrible surprise," says Brown in an almost comic understatement, "had to be the result of his subsidiary managers either lying to him or not knowing how poorly they were doing, or both."

Yet it can be argued that Ling was partly a victim of pure bad luck. While the economy was surging, LTV could paper over its weaknesses and use its rising stock to buy more companies. Then the Nixon Administration's anti-inflation "game plan" led to the recession and stock market collapse of 1969-70. That in turn shook out many of the glib-talking hustlers who had built too big on shaky foundations. Further, the Administration, responding to complaints from established businessmen that the conglomerate operators were dangerous predators, started a particularly vigorous antitrust drive. Jim Ling was its prime target. Justice Department suits prevented him from doing anything to straighten out the problems at the biggest and most troubled company that he had acquired, Jones & Laughlin Steel.

Author Brown is sometimes wordy and overpraising of his subject. All correction made, though, Ling comes through as an honest, essentially likable man. The book, however, does not confront the larger question of the effect of conglomerates, and whether or not Ling, whatever his intentions, was more of a force for good or ill in America. It is hard not to conclude that Ling and overreaching conglomerators like him have put a severe strain on the fabric of public trust in big business. The giddy ride up at LTV was a good trip for many shareholders and bankers; but when Ling fell, he left a trail of tottering companies, broken careers and distraught investors. Jimmy Ling himself has salvaged several million dollars out of a fortune that once was about $70 million. He has started another budding conglomerate, with the symbolic ending-to-beginning name of Omega-Alpha. Its stock came out a year ago at 5 1/2 and has lately fallen to 2 1/2. Ling has not lost his confidence, however. After all, he is only 49 years old. qedMarshall Loeb

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