Retreat from Tomorrow
One of the most pressing U.S. problems is mass transit--so it might seem that a company with plans for speeding the movement of people from home to office was well positioned to prosper. Not so: when inflation and recession struck, city fathers and taxpayers rebelled against any projects that did not seem absolutely essential. Among companies caught with unfulfillable dreams of tomorrow, none has suffered more than Rohr Industries, Inc. of Chula Vista, Calif.
During the early 1970s, executives of Rohr, primarily an aerospace subcontractor, boasted that they would help rebuild the nation's surface transportation system. They planned futuristic trains, air cushions and people-movers (transmission belts carrying people rather than baggage). With equal enthusiasm, they spoke of new vistas in space communications and automated mail systems. It added up to a grand adventure into uncharted terrain--a bit too grand.
No More People-Movers. For a time, Rohr sold enough vehicles to long-planned transit systems to push sales to nearly half a billion dollars last fiscal year. Nonetheless, it reported a $7 million loss, its first in 15 years. That was followed by a deficit of $47 million for the first nine months of fiscal 1976, which ended May 2. The company has suspended all dividend payments and is asking 18 banks and insurance companies to work out a new credit agreement (the lenders have already waived most provisions of a $110 million long-term loan). Meanwhile, the company is in full retreat from tomorrow. It plans to shut down or sell off all of its money-losing operations. Among other things, it will stop building monotrains and magnetically propelled people-movers for shopping centers and amusement parks, turbine-powered trains for Amtrak and computer-driven cars for city subway systems.
What went wrong? Just about everything. Rohr, says one analyst who follows the company, "tried to do too much too fast." It underestimated the cost of new vehicles and spent more than it could afford--about $15 million in the past three years--on research and development of its dream vehicles and other new products. The 1974-75 recession wiped out orders just when the company desperately needed an influx of new business to cover development costs (its high sales came from longstanding orders). In addition, Rohr got into disputes with customers over the quality of those vehicles it did sell. San Francisco's BART is suing Rohr and 17 other companies for $145 million, alleging poor performance of 450 cars, and disagreements are developing with Washington's Metro over more than 70 cars delivered to that new subway system (out of 300 ordered).
Buyers Needed. Last November, Burt Raynes, the man who took Rohr into the grand adventure, stepped aside as chief executive; three months later he also quit as chairman. His successor: Fred Garry, 54, a former General Electric engineer who was brought into the company as president in 1974. Besides withdrawing from futuristic projects, Garry plans to push for more military contracts and concentrate on aircraft-related business, which still accounts for two-thirds of Rohr's sales. The company builds pods and other jet parts for all major aircraft manufacturers and has good prospects of landing orders for developmental work on new Navy ships. Garry's most pressing task, however, is to persuade lenders to give Rohr more time to raise needed cash by finding buyers for its ill-fated ventures. If Rohr cannot complete an orderly retreat from the future of mass transit, its own future may have vanished.
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