Conglomerate Collapse

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By Glenn Rifkin

When LTV Corporation declared bankruptcy and closed its doors for good in late 2000, it marked the end of a most atypical and peculiar 50-year corporate journey. The Cleveland-based company, which had once been among the most successful conglomerates in the United States, had been in so many businesses over its lifetime—from hamburgers to missiles to steel to footballs to bomber jets—that it was nearly impossible to explain what exactly it did. But while LTV’s mergers and acquisitions playbook may have fathered the concept of modern conglomerates like ITT, GE, and Gulf & Western Industries, it also eventually led to its demise.

That demise dragged on through not one but two major bankruptcies, and came long after the firm had abandoned the sprawling approach for one product. The product happened to be steel, and even though LTV became one of the country’s largest steel producers, cheap foreign steel eventually decimated it and the rest of the domestic steel market. As the firm collapsed, nearly 82,000 steelworkers, past and present, were left with pension cuts and no healthcare benefits. Many of those workers, whose families had worked for generations in steel factories in the Midwest, suffered from heart and lung issues. “This is really a human tragedy that is unfolding,” said Dennis Henry, president of the local union, at the time. Only a last-minute rescue from a government entity saved the pensions.

But to understand the LTV story, one has to go back to its founding by an audacious entrepreneur named James Ling, dubbed the “merger king,” who boldly shaped the company with his unique business vision. Born in poverty in 1920s Oklahoma, Ling pursued a career as an electrical contractor and eventually, with $3,000 saved, started Ling Electric. The business did well—but Ling soon hatched a far more ambitious plan.

Deciding that building a company to sell a single product or service was too restrictive and slow-growing, Ling envisioned a path to riches and influence by another, as-yet-untried route: mergers and acquisitions. He began acquiring companies using capital from shares in the fledgling company that he sold at a booth at the Texas State Fair, raising an impressive $738,000 to fund his venture. Ling “collected companies the way boys collect baseball cards,” according to his New York Times obituary. To him, it didn’t matter what a company did or made, he would take over that business and split it into different divisions, sell stock in each of the divisions, and get enough capital from the banks to keep growing and growing. He called it “redeployment.” It wasn’t a Ponzi scheme, but it was a risky venture. And it worked.

In just 14 years, Ling built LTV into the 14th largest company in the Fortune 500. From 1955 to 1965, LTV was the fastest-growing company in the country, employing 29,000 workers and offering 15,000 different products. Ling graced the covers of Time and Fortune and was called “The Dazzling, Legendary Jimmy Ling.” By 1970, the company, then called Ling-Temco-Vought (LTV), was in aerospace, meatpacking, sporting equipment, and electronics. Among its affiliates were Braniff Airways, Wilson Sporting Goods, and National Car Rental.

Charismatic and a fast talker, “Jimmy Ling had presence,” wrote Neal Barrett Jr., a former executive at LTV. “He was there, in the room, and everyone knew it.”

But by 1970, a poor economy and stagnating sales, along with antitrust pressures, were wreaking havoc at LTV, and the board forced Ling to step down as CEO. “Conglomerate kings are jugglers,” Barrett wrote. “Ling was a good investor, but it’s hard to judge and manage companies that have nothing in common. The people at the top often lack the expertise to manage the companies they control.”

Despite trimming its portfolio down to just three lines of business, LTV faltered and began losing money. After trying to expand once more with a new CEO, the firm decided in 1980 to focus solely on the steel industry. It stayed that way for two decades until the crushing arrival of foreign steel. Though it had embraced a single-industry business model—a strategy that certainly had Jimmy Ling spinning in his grave—it couldn’t navigate a troubled market well enough to survive.

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