Steering Into A New Era
February 1 2000 by Norm Mayersohn
If his background as a professional wrestler can serve Gov. Jesse Ventura so well in the Minnesota statehouse, why aren’t recruiters rushing to interview WWF alumni for positions in America’s executive suites? Surely the time inside the ring would provide many of the key skills needed to direct a conglomerate like TRW, which butts heads with industrial giants in the brutally competitive automotive, aerospace, and defense industries and is deep in the process of integrating a new player, one-time-opponent LucasVarity, into its lineup.
As it happens, TRW’s Joe Gorman does bring an athletic edge to his role as CEO, though it’s one developed in the more refined world of college basketball. Last year’s all-cash acquisition of London-based LucasVarity came as a bold offensive maneuver on Gorman’s part, not only acknowledging a pervasive consolidation among industrial suppliers, but also capitalizing on an opportunity to step up to the next level of the game. In the hyperventilated mergerscape of the ’90s, the coupling of TRW and LucasVarity may not rank among the top handful of takeovers, being a mere $7 billion transaction, but outside of the dot-com world it may represent one of the more influential combines in its industry.
More significantly, perhaps, it is considered by some to be a daringly large debt assumption for TRW, coming off a tough stretch in the Asian market and declines in the aerospace/defense sector, even though it is expected to be offset by divestitures of overlapping units and a projected $200 million in synergistic cost savings by the end of 2001. Even so, Gorman’s approach to the acquisition is patient and long-term: “We’re running a marathon, not the 100-yard dash.”
Complementary revenue centers make for an ideal fit between the two organizations, but more importantly the merged company achieves the critical mass—number five among all automotive suppliers with $13 billion in auto-industry revenue—that it needs to face down insiders such as Delphi Automotive and Ford’s Visteon, which began as captives but are increasingly independent. Gorman’s game plan, then, is necessarily one that engages the competition on many fronts. First there’s the traditional auto parts segment—accounting for some 61 percent of TRW revenues—which is dominated by occupant safety systems and steering/suspension systems. “Since 1998, TRW revenues from each car produced has grown from $217 to the point where we now we have over $1000 worth of content on the new Jeep Cherokee, including suspension and restraint systems,” Gorman notes in his explanation of the company’s plan to outgrow the industry. History is on his side, with complex technologies such as the arrival of passenger-sensing air bags and a growing reliance by automakers on suppliers for design and engineering tasks.
Aerospace, defense, and information systems are responsible for the remaining third of TRW revenues. Building on the leadership it established early on as the prime contractor for the nation’s ICBM defense system, TRW has branched into the more exotic concepts of information warfare, battlefield digitization, and sophisticated laser anti-missile systems. This fiercely competitive arena has few assurances, but once the contracts are signed, Gorman notes, “it’s all done on a cost plus basis.”
While today’s TRW may be rightly considered the roosting place of countless rocket scientists, its beginnings are more nuts and bolts—literally. But what started in 1901 as the Cleveland Cap Screw company soon transferred its manufacturing technology to the fabrication of engine valves. A century later, TRW continues to supply valves and still has operations in that original brick building in Cleveland. The early leadership in production technique and metallurgy led to a position as a key supplier to the booming aircraft industry, even providing components for Lindbergh’s historic flight across the Atlantic.
Gorman himself is close to being a TRW lifer, having joined the company’s legal department in 1968 after graduating Yale Law School and practicing corporate law for five years in Cleveland, rising to TRW president and COO in ’85. As head coach of the team, Gorman is adamant that the huge diversity of TRW’s operations can lead to segment advantages. Air bag crash sensors developed from the efforts of the space program and algorithms developed in defense systems, for examples, contribute to a frontrunner position in the “smart” electronic controls of our future.
There is much to do, but Gorman says his resolve to keep TRW at the leading edge of scientific advances will not be shaken. “Our advantage is that through the missile and satellite activities, we’re technology rich.” That’s vital, Gorman says, “because we’re in the business of doing what’s never been done before.”
JOSEPH T. GORMAN
CHAIRMAN AND CEO
“WE’RE RUNNING A MARATHON, NOT THE 100-YARD DASH.”
Birthplace: Rising Sun, IN
Family: Children (grown): Leslie, Joseph T., Jr., and Bradley.
Education: J.D., Yale Law School, ’62.
Vehicles: Porsche 911 Turbo; Porsche 911 Cabriolet; ’51 MG TD; BMW 850 CSi; VW Beetle convertible.
Leisure Interests: Shooting (skeet and bird hunting). “I own more shotguns than cars.” Major Influences: Father (a university professor); Horace A . Shepard and Ruben F. Mettler, both ex-chairmen of TRW.