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Westinghouse and Group

Overview

This profile considers the Westinghouse electrical and media group. It covers -


  • Introduction
  • Early history
  • Lights, cameras and nuclear reactors
  • Group W
  • A decade of churn
  • From CBS to Viacom
  • Studies

Introduction

Electrical manufacturer and broadcaster Westinghouse Electric - the smaller, less successful cousin of General Electric (owner of NBC) - acquired CBS in 1995 for US$5.4 billion. At that time Westinghouse's 'Group W' broadcasting arm had five television stations and 18 radio stations.

Following the CBS acquisition Westinghouse absorbed the Infinity radio broadcasting and outdoor advertising group for US$4.7 billion and then changed its name to CBS. It continued selling off traditional Westinghouse operations such as power-generation equipment and light bulb manufacturing.

Reflecting increasing concentration among US radio broadcasters, the new CBS acquired the American Radio Systems chain for US$2.6 billion and the Nashville Network & Country Music Television for US$1.55 billion in 1997, selling 17% of Infinity Broadcasting for US$2.9 billion a year later and engulfing television program syndicator King World Productions.

CBS sold the former Westinghouse defence electronics arm for US$3 billion, land development arm for US$430 million. Knoll furniture for US$560 million, residential security operations for US$430 million and Thermo King to Siemens for US$2.6 billion. Infinity spent US$8.7 billion buying billboard giant Outdoor Systems in 1999.

During that year CBS was acquired by Viacom, discussed in more detail elsewhere on this site, for US$50 billion.

Early history

Westinghouse traced its history to establishment of the Westinghouse Air Brake Company in 1869. That business was headed by George Westinghouse (1846-1914), an inventor who was arguably more creative than rival Thomas Edison but less successful in self-promotion.

In 1884 he formed the Westinghouse Electric Company (which became the Westinghouse Electric & Manufacturing Company two years later). Westinghouse acquired Tesla's electricity patents, challenging Edison-inspired General Electric (GE) through effective advocacy of alternating current and expansion overseas. He initiated long-distance power transmission and hydroelectric generation at Niagara Falls in 1896; like GE the group subsequently had major stakes in electricity and gas utilities before divestment after 1943 under the 1935 Public Utility Holding Co Act.

Westinghouse lost control of the group as part of the 1907 financial panic.

Research by Tesla and others into radio (and government seizure of Marconi patents) was reflected in manufacturing of military transmitters and receivers during the following decade. In 1919 its Pittsburgh radio station 8XK received an experimental licence. Westinghouse was one of the founders of Radio Corporation of America (RCA), joining with GE, US telecommunications giant AT&T and United Fruit. It acquired the International Radio Telegraph Co in 1920 and launched commercial radio stations in Philadelphia, Newark, Pittsburgh and other locations.

In 1926 it took a 20% stake in NBC (with 30% held by GE and 50% by RCA) in 1926 as the 1920s 'radio boom' gathered pace, subsequently buying radio stations WGL and WOWO. The 16-station United Independent Broadcasters (UIB) network had meanwhile been restructured as the Columbia Broadcasting System (CBS), with 47 affiliate stations.

Westinghouse rode the boom as a manufacturer of major equipment (including locomotives) and appliances. Failure to expand downstream into record and film production or to establish a large-scale broadcast network reflecting regulatory constraints, lack of enthusiasm by key investors and the modus vivendi with competitor GE through the RCA joint venture. RCA encompassed broadcast, recording and film production interests.

In 1932 Westinghouse and GE exited from RCA under pressure from the US Department of Justice. Westinghouse retained its radio stations but was wary about expansion of its holdings to form an independent network in competition with NBC's two networks and CBS. The latter acquired the independent Columbia Records in 1938.

Westinghouse emerged from the 1939 war as the world's second largest electrotechnical group, with diverse manufacturing operations. Broadcasting formed a visible but not dominant element of the group, which like Matsushita several decades later was driven by an engineering ethos and an emphasis on large-scale manufacturing. Westinghouse looked forward to peace for extension of its existing international operations and deployment of technologies such as television.

Lights, cameras and nuclear reactors

The 1950s arguably saw Westinghouse at its peak. In 1945 it had been renamed Westinghouse Electric Corporation. It rode the Eisenhower Boom by expanding production of domestic appliances and power systems, underpinned by establishment of Westinghouse Credit in 1954. That financier was modelled on GE Credit, established in 1932, but was significantly less successful than the GE arm and its problem loans greatly contributed to Westinghouse's difficulties during the 1970s.

In 1955 Westinghouse acquired DuMont's Pittsburgh WDTV station for US$9.75 million, more implausibly expanding into land development and softdrink bottling during the 1960s. At the beginning of the 1970s Westinghouse sold its small home appliance and then its large appliance (eg stoves and refrigerators) operations. CBS more modestly unloaded the New York Yankees sports team.

The middle of the decade saw Westinghouse in crisis, after soaring uranium prices saw it renege on supply contracts to purchasers of its nuclear power systems. (Westinghouse responded to litigation by suing an alleged cartel of uranium producers, including Australian miners). Westinghouse sold its 45% stake in French nuclear plant builder Framatome and its Econo-Car car rental agency.

Group W and TelePrompter

During 1981 Westinghouse Broadcasting & Cable acquired the TelePrompter cable television group for US$646 million (including some US$70 million to Jack Kent Cooke). TelePrompter was rebadged as Group W Cable but proved disappointing, with cashflow not compensating for pressures to upgrade the network.

Westinghouse sold its WOWO radio station and its lighting operations. CBS was concurrently selling its stake in Satellite Network News, buying a stake in the SportsChannel regional sports networks with Washington Post, and forming Tri-Star Pictures with HBO (Home Box Office) and Columbia Pictures.

A decade of churn

1984 initiated a decade of churn, as a succession of chief executives and advisers grappled with demands for higher growth and improved strategic direction.

During that year Westinghouse unloaded its industrial fan operations and its education products arm, buying robotics manufacturer Unimation. In 1986 it sold Muzak, buying a Los Angeles TV station. A year later it sold Group W Cable to Comcast, AT&T and TCI. It bought radio stations in Sacramento and Chicago, a waste-disposal business and electrical equipment operations. Asset-shuffling gathered pace with sale of its elevator division to Schindler, its transmission division to ABB Asea Brown Boveri, its rail/peoplemover division and 7Up bottling division.

CBS, after coming into the orbit of cigarette to insurance conglomerate Loews, had meanwhile been streamlining through sale of its book publishing and music publishing arms. CBS Records was sold to Sony for US$2 billion. In contrast, Westinghouse acquired a grab-bag of assets, including Legacy Broadcasting Company, Shaw-Walker and Reff furniture, Knoll International furniture.

In 1994/5 for example it sold the Westinghouse Communities land development arm and its electrical supplies and distribution & controls arm, borrowed US$3 billion from GE Credit and bought the Norden electronic systems division of the United Technologies conglomerate. It established a partnership with CBS for management of its broadcasting stations.

CBS to Viacom

In 1995 Westinghouse acquired CBS, buying the Infinity radio broadcasting and outdoor advertising group for US$4.7 billion during the following year. That acquisition - which made Infinity's CEO Mel Karmazin, later Viacom CEO, its largest shareholder - was offset by disposal of Knoll and Westinghouse's defence electronics and security systems arms (bringing in some US$4 billion).

A year later, amid announcements of further major sales, Westinghouse was renamed CBS.

The change was emphasised by purchase of the American Radio Systems chain for US$2.6 billion and the Nashville Network & Country Music Television for US$1.55 billion, increasing CBS' radio holdings to 175 stations, and disposal of the Thermo King refrigerated transport arm for a similar amount.

In 1998 it sold 17% of Infinity Broadcasting for US$2.9 billion, also swapping several radio stations with Entercom. In 1999 CBS bought King World Productions, a leading television program syndicator, for US$2.5 billion and Outdoor Systems billboard group for US$8.7 billion. During the same year Viacom acquired CBS for US$50 billion. The group's history since that time features in the separate Viacom profile on this site.

Ironically, the sale of the CBS nuclear power arm to BNFL (British Nuclear Fuels) was finalised in 1999, with that unit being rebadged as Westinghouse Electric Company.

Studies

George Westinghouse has attracted less hagiographic treatment than Edison or Tesla. Three points of entry are Richard Moran's Executioner's Current: Thomas Edison, George Westinghouse and the Invention of the Electric Chair (New York: Knopf 2000), Henry Thomas' George Westinghouse (New York: Putnam 1960) and Inventing the Electronic Century: The Epic Story of the Consumer Electronics and Computer Industries (New York: Free Press 2001) by Alfred Chandler, Takashi Hikino & Andrew von Nordenflycht.

For Westinghouse's early broadcasting activity see Susan Douglas's Inventing American Broadcasting 1899-1922 (Baltimore: Johns Hopkins Uni Press 1987). Context is provided by Erik Barnouw's journalistic three volume A History of Broadcasting in the United States (New York: Oxford Uni Press 1966-70), Robert McChesney's Telecommunications, Mass Media, and Democracy: The Battle for Control of US Broadcasting, 1928-1935 (New York: Oxford Uni Press 1993) and Hugh Aitken's The Continuous Wave: Technology and American Radio 1900-1932 (Princeton: Princeton Uni Press 1985). His Tube of Plenty: The Evolution of American Television (New York: Oxford Uni Press 1975) is less engaging than David Fisher's Tube: The Invention of Television (Washington: Counterpoint 1996).

Fred MacDonald's One Nation Under Television: The Rise & Decline of Network TV (New York: Pantheon 1990) and Ken Auletta's Three Blind Mice: How The Television Networks Lost Their Way (New York: Random House 1991) offer perpectives on network developments. More detailed pointers feature in the CBS profile.

For the uranium imbroglio see in particular Debora Spar's The cooperative edge: the internal politics of international cartels (Ithaca: Cornell Uni Press 1994).