The chairman of the Bendix Corp. was misidentified in a story on the RCA Corp. in yesterday's Business & Finance section. His name is William M. Agee. CAPTION: Picture, Thornton Bradshaw signed a $4.5 million, five-year contract to rebuild and redirect RCA. AP; Chart, A PROFILE OF RCA CORPORATION, By Gail McCrory--The Washington Post
Thornton Bradshaw, who took over RCA Corp. 10 months ago, says that more than anything else, the beleaguered company needs time.
The question is whether there is enough time for RCA, the company as responsible as any for the development of the nation's broadcasting system, to catch up with an industry that may be passing it by.
The answer is likely to say a great deal about the future of the communications industry, as well as the future of RCA, a company with 117,000 employes, assets at the end of 1981 of close to $8 billion and a laundry list of problems almost as tall as the Rockefeller Center tower, where the RCA initials are a fixture over this city.
"I found perhaps a lot more problems than I had initially thought," Bradshaw said, puffing on a pipe, during an interview Friday. "But the important thing is that this is the time for a company like RCA. This is not an industry that it fading. This is not the hat industry. It is growing. All we've got to do is take advantage of it."
In recent years, a major cause of RCA's problems has been instability in its board room. Robert Sarnoff, son of RCA's founder, was removed as chairman in 1975 and was replaced by Anthony Conrad. Ten months later, Conrad left after it was revealed that he had not filed income taxes for five years.
Bradshaw's predecessor, Edgar H. Griffiths, followed, but was ousted by a bitter board of directors in January 1981. At the time, Griffiths was criticized by company insiders for failing to establish corporate goals for RCA.
The previous year, Griffiths hired Maurice R. Valente as president of the company. Six months later, Valente was fired. "You only get one chance to make a mistake like that," Bradshaw said. Only a few weeks after Valente's departure, Jane Cahill Pfeiffer was forced out of her job as chairman of the NBC subsidiary.
Bradshaw, who signed a $4.5 million, five-year contract, is planning on a dramatic rebuilding of RCA and a redirecting of the company's currently limited cash. The goal is turning RCA toward what Bradshaw, an erudite, 64-year-old former president of Atlantic Richfield Co., views as the company's historic mission: electronics, communications and entertainment.
That means moving away from businesses as far removed from that cluster as cars, carpets and chickens.
It also means that Bradshaw is faced with transforming a company that no longer has the reputation of being the leader in technology, innovation and talent because of its blunders in management, hiring and diversification.
As a result, the company is redefining its corporate identity at a time of unprecedented redeployment of assets in every sector of the communications industry, changes altering businesses as diverse as radio, television, cable TV, satellites and film. And it must face much stiffer competition from Japan in consumer electronics, where it was a long-time leader, while it lacks the power, clout and bottom-line stability that RCA's NBC television network--deep in third place in the network sweepstakes--historically brought the company.
"There was a misconception around here for quite a long time that electronics was a mature industry," Bradshaw said. "It was an easy misconception to fall into. Ten years ago it looked as though we had come to a plateau in consumer electronics. Today, it is just as obvious that we are facing an extraordinary explosion in communications, in the need for entertainment software and in the electronics that feeds the whole thing."
What is less obvious is precisely where RCA fits, or where, for that matter, any of the other communications giants that are fighting for a piece of the new computer, cable and satellite-driven home electronics market will fit during the industry's restructuring of the coming decade.
"Who's going to win?" Bradshaw asked rhetorically. "We don't know that. If I had the answer I'd sure keep it to myself. RCA's game plan is to be involved with as many of the delivery systems as it possibly can, to play as many numbers on the green table as we can."
For now, the two other major national television concerns--CBS and ABC--are lumbering along with RCA toward a new era. When RCA's joint cable programming venture with Rockefeller Center Inc., The Entertainment Channel, makes its debut later this year, all three giants will have stepped into the cable programming market with so-called "culture." RCA's venture will be fueled by BBC programming, long the fare of public television, in an effort Bradshaw says is different from ABC and CBS satellite networks because it combines mass entertainment with a tinge of culture.
Meanwhile, ABC is involved in news and sports joint ventures in a cable business it once fought tooth and nail, and CBS is eager to begin operating its own cable system. CBS and RCA are also seeking authority to get into the direct satellite-to-home television business.
But the irony for RCA lies in the fact that it was an RCA satellite that provided the impetus for the current programming boom, supplying for Time Inc.'s Home Box Office the distribution mechanism to build, beginning in the mid 1970s, the ballooning pay television market. That is but one example of a litany of missed opportunities that clutter RCA's recent past. "I wish we had been there," Bradshaw observed. "But," he added, it would take a "long article" to "look at the opportunities we've missed."
What RCA has going for it as it struggles for rejuvenation is a strong satellite business, a toehold in the growing (though not as fast as RCA expected) videodisc business, a large staff of about 6,200 scientists and engineers, and an existing television network.
"Terrific," he exclaims when asked how he'd categorize NBC's potential. "We've got more potential than anybody else," he said with a laugh. The network has only to move into a position of evenly sharing the television market with ABC and CBS to raise its profitablity by $175 million, Bradshaw said.
Going against Bradshaw's grand design, however, are RCA's heavily leveraged financial portfolio, deep debts at a time of continuing high interest rates, NBC's cellar-dwelling status and a seemingly endless stream of bad news. "The company is overexpanded as it is overdiversified," he said.
In fairness, however, much of that bad news, particularly the company's most recent developments, stem from the errors of Bradshaw's predecessors, although Bradshaw has been a member of the company's board of directors since 1972.
He has formulated the long-term RCA plan with its emphasis on technology. As a result, he has put the company's Hertz Corp. subsidiary on the block, and RCA is "negotiating seriously with several buyers," including Firestone Tire & Rubber Co., for the sale. That move would rid the company of $1.4 billion in debt and provide potentially as much as $800 million in cash.
An effort to sell the profitable C.I.T. Financial Corp. has been abandoned. "It would have to be sold for over a billion dollars and that's a lot of money in today's market," he said. "But we can still be pure and still have CIT since it is not on our balance sheet. They don't drain us financially or in management time." But the prospects for unloading Coronet Industries, a carpet maker in a stagnant industry, are remote, Bradshaw admitted.
Earlier, RCA sold Banquet Foods, which sells frozen chicken and other food products.
Further, Bradshaw has been forced to order a sharp slash in the price of the RCA videodisc equipment, down from $500 a unit to $300 per player. On the other hand, the discs themselves "are going like gangbusters," he said. "Perhaps we learned a lesson that this is a software-driven business," he said.
Bradshaw is trimming fat at RCA, he said, noting a cut of 90 people from a staff of about 700 at the management level. Other sharp cuts are difficult, he said, since television receiver sales, though cramped by low margins, are strong, thus making plant closings inappropriate.
He hopes the cuts will come to about $200 million in annualized savings within another year. Further, the company cut its dividend in half last month, while last year Bradshaw wrote off $150 million in losses leading to 1981 profits of $54 million, 83 percent less than the previous year. This year's first quarter showed a profit drop of another 25 percent when a gain from the sale of several businesses is removed.
Pieces of a new Bradshaw team are now in place, including NBC head Grant Tinker, the programming expert who built MTM Enterprises, and a new chief financial officer, Richard Miller, former chief financial officer of Penn Central Corp. In addition, Bradshaw hopes to bring in a new president, presumably the heir to his post, before the end of the year.
And he is determined to fend off takeover attempts. Despite his polished manner, Bradshaw took the gloves off when it appeared that Bendix Corp. and its chief executive, Philip Agee, were looking to buy a controlling interest in RCA, charging that Agee could not manage "his own affairs," a not-too-subtle reference to Agee's well-publicized relationship with former Bendix executive Mary Cunningham. Agee backed off.
"We'd like to get on with it," he said. "We need a little time, and we don't need to be diverted. That's why we got exercised. We'll do what is necessary."
Will Bradshaw have time to carry out his program? "The situation is precarious only in that I suppose people will raise the question of whether we will have the time or whether somebody is going to come in and attempt some form of takeover," he said. "We don't want to be interrupted. Like President Reagan, we want the time, but like Reagan, we may not get it. I think we will.
"This full year will be considerably better than last. We've cleaned all the discrete messes we could get our hands on."