"I've seen a cat without a grin, but a grin without a cat is indeed a mysterious thing"
Alice commenting on the disappearing Cheasire Cat in Alice in Wonderland .

On November 14th, Westinghouse corporation mysteriously disappeared leaving
behind only its nuclear grin. How does the one of the worlds great
industrial giants and the planets biggest maker of nuclear power plants
simply vanish ? A bit of history may demystify.

Once upon a time multinational capitalism was simple. If you were a huge
corporation, you were always seeking smaller companies which you could buy
up to make your empire larger. You looked for the best price and if you
could find it industries which complimented your own, this was a good thing
- but not required. During the 60s and 70s Westinghouse purchased a number
of companies not much related to its original work of electrical
engineering. It acquired a refrigeration equipment manufacturer, a land
development firm (real estate), a soft drink business and a robot
manufacturer and others. Westinghouse then proceeded to sell off parts of
itself beginning with consumer electronics lines which had long been its
mainstay: lamps and various household appliances divisions. During this
period Westinghouse also broke a number of contracts to nuclear power plants
it had built for cheap uranium and faced hundreds of millions of dollars in
lawsuits.

In the late 1980s, Westinghouse ventured into financial services market and
this was a disaster. Financial services losses plus expensive law suits
plus errors in diversification left the company over US$ 10 billion in debt
by 1992. The president was fired and a new management team was brought in.
By 1995 they had turned the company around enuf to buy CBS, the leading
television network in the US at the time. Westinghouse had long been
involved with radio stations, but this was its first step into television.
It appeared the media business might save the company.

As orders for nuclear power plant steadily declined, the 6000 person nuclear
division of Westinghouse became a consistent drag on companies profits.
Like many other over-diversified multinational managers, Westinghouse
decided in the late 1990s, rather than trying to do some of everything, it
was better to focus on a profitable industry it understood and shed other
divisions. The new Westinghouse management team having learned for previous
expensive mistakes wanted to evolve into a "pure-play" media company [doing
nothing else than media].

A number of European nuclear multinationals were interested in bidding on
Westinghouse's nuclear shop, including Siemens, Framatome, GEC-Alsthom and
British Nuclear Fuels Limited. There are two clear strategic reasons.
Westinghouse has a large base of maintenance controls for reactors in the
US, which these European firms would love to control as an entry into the US
market. And if there is a future to nuclear construction in eastern Europe,
then Westinghouse is the only company with experience upgrading the most
modern Russian design reactors (Temelin), a key selling point for future
orders.

On Nov 14th Siemens announced its purchase of the Westinghouse's non-nuclear
turbine division for US$ 1.5 billion in cash (this division is the largest
non-media part of Westinghouse with 8300 employees and had over US$ 2
billion in sales in 1996). Siemens had also very much wanted to buy the
nuclear division of Westinghouse, but according to the Financial Times, the
US government intervened late in the negotiations and blocked the sale of
the nuclear division to Siemens or any other European company, because it
did not want this technology sold to a foreign company.

Unfortunately for Westinghouse, the only US company which has the size to
consider purchasing them is their long time rival, General Electric. GE has
avoided the competition for completing reactors in eastern Europe and has
instead focused on the Pacific Rim. The recent set of financial depressions
in that region has adversely affected the GE's cash flow and made several
risky reactor projects even more uncertain. This combined with the fact
that GE produces boiling water reactors, a totally different design than
Westinghouse, means the chances for a US takeover are extremely small.

None-the-less financial pressure on Westinghouse to sell off its nuclear
division is quite large. The Wall Street Journal reports "as a stand alone
company, industrial Westinghouse faced a shaky future - its stock virtually
worthless and almost no cash to invest in new products." Recognizing this,
at the time of the Siemens announcement Westinghouse renamed itself CBS and
broke its long standing commitment to its engineering employees by promising
to sell off all the non-media divisions by the middle of 1998. But with no
domestic buyers in sight and foreign vendors blocked from purchasing it,
Westinghouse's nuclear grin may linger for a very long time.

Sources: Wall Street Journal Nov 20, 1997
Financial Times Nov 19, 1997
ABC News Nov 14, 1997
Siemens and Westinghouse corporate Websites
Interview with Paul Gunther, NIRS

Authors Note: Ultimately, Westinghouse Nuclear was purchased by British Nuclear Fuels Limited (BNFL) and an otherwise insignificant US corporation.