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All Eyes Are On New Owner of Ford Aerospace : Buyouts: Analysts praise Loral Corp.'s financial razzle-dazzle in making the acquisition. But workers are worried about jobs and benefits.


NEWPORT BEACH — On Wall Street, Loral Corp. Chairman Bernard Schwartz is something of a hero.

Stock watchers use adjectives such as "brilliant" and "amazing" to describe his acquisition strategy, which has transformed a small, money-losing New York company into a highly profitable, $1.27-billion defense electronics leader.

But on Main Street, Schwartz's reputation is a bit less stellar. His strict devotion to quarterly profit growth sometimes means belt tightening at newly acquired companies. And although Loral's far-flung divisions are given considerable operational autonomy, it is Schwartz, the defense industry's highest-paid executive, who calls the important shots.

Now that Loral has agreed to buy Newport Beach-based Ford Aerospace Corp., a subsidiary of Ford Motor Co. and one-third larger than Loral, Schwartz's management methods will be put to their most rigorous test. The deal, which involves $715 million in cash and assumption of other obligations of undisclosed value, is expected be complete within three months.

Wall Street analysts praised Loral's financial razzle-dazzle in landing Ford Aerospace. They note that the company bested rival bidders with deeper pockets with a deal structured to avoid a dangerous mountain of debt.

But Ford Aerospace's 17,000 rank-and-file workers are worried about their jobs and benefits.

Several managers, who asked not to be identified, said they fear that Loral will raid the company's overfunded pension plan. And despite Loral's statements to the contrary, they suspect--along with many analysts--that Schwartz will sell off some divisions and move the company's missile operation from Newport Beach.

"Morale is low because people think Ford (Motor Co.) is selling us out," said one middle manager with more than a decade of experience at Ford Aerospace's Aeronutronic missile division in Newport Beach.

But Schwartz says employees have nothing to fear. "We don't close plants, move people around; and in the main we've been able to create an employee structure that continues benefit programs and gives them additional opportunities for growth," he said. "Everyone has a job."

Schwartz declined to discuss the pension overfunding--estimated to be $300 million to $400 million--until the deal is final, although he noted that the company has agreed to pay all existing benefits to Ford employees and retirees for two years. Analysts said it is unlikely that Schwartz would make the politically unpopular move of using pension excess funds, which might draw intense government scrutiny.

And Schwartz said the structure of the deal, in which Loral formed a separate joint-venture company with Shearson Lehman Hutton Inc., will relieve the company of any pressure to sell off pieces of Ford Aerospace.

"It's a brilliant move from Loral's perspective," agreed Peter Aseritis, defense analyst with First Boston Corp. in New York. "They can't be hurt by the debt burden and they should be able to keep the operations in the short term."

Loral, moreover, is widely viewed as a well-managed company that has done a remarkable job of assimilating acquisitions and delivering complex electronic warfare systems on time and within budget. Its markets, which include microwave and optical surveillance systems, electronic countermeasure systems and battle simulators, are among the few growth segments in an era of defense cuts.

"They started as an unknown company and built themselves through acquisitions," said Walter Peterson, analyst for Ferris, Baker Watts Inc. in Baltimore. "There is likely some feeling among Ford people that it (Loral) is not part of the defense establishment. But it is winning bigger contracts now, and those concerns should go away."

Schwartz, a plain-spoken 64-year-old Brooklyn native who has a financial background, manages the sprawling firm with a combination of local autonomy and strict corporate oversight. Management of acquired companies is generally left intact--as long as rigorous profit objectives are being met.

But there are enough blots on Loral's record to give the employees at Ford Aerospace pause. Loral pleaded guilty last year to a fraud charge related to the Pentagon procurement scandal known as Operation Ill Wind. The company was accused of lying to the government when asked if it had hired anyone to find out who was bidding on a contract.

In December, Loral took a charge of $10.6 million against earnings to pay fines and related claims, which led to an earnings drop of 26 cents a share.

Schwartz himself has drawn criticism. Just before its earnings drop was reported publicly in December, he sold 19% of his stock for $4.5 million, and three other Loral officers and a director also sold stock. Schwartz said the sale was motivated by personal and tax considerations and he had warned analysts for weeks that the special charge was coming.

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