Western Electric, 114, Put on Retirement List

By Karen W. Arenson
The New York Times

December 15, 1983

After more than 100 years of corporate life, first as an independent company and then as the manufacturing arm of the American Telephone and Telegraph Company, the Western Electric Company will be dissolved on Jan. 1, A.T.& T. said yesterday. The giant company's people and plants will spread among other divisions of the new A.T.& T.

Western Electric has become virtually synonymous with the telephone in America and its manufacturing expertise has long been held up as an example of how to do things right. But its name will survive only in corporate history and as a brand on some - but not all - of the equipment A.T.& T. produces.

A newer organization, A.T.& T. Technologies, set up to meet A.T.& T.'s competitive needs after divestiture, will assume Western Electric's corporate charter, its financial obligations and its other commitments, officials said at a news conference yesterday.

Backing the A.T.& T. Name

''We could have chosen to call this new enterprise Western Electric,'' said Charles L. Brown, A.T.& T.'s chairman. ''We chose instead to put all our resources and reputation behind the A.T.& T. name.''

Donald E. Procknow, Western Electric's 61-year-old president, will be vice chairman of the new company. A.T.& T. Technologies will be the umbrella organization for A.T.& T.'s unregulated business, such as consumer products, each with its own manufacturing and production capabilities, as well as development and marketing responsibilities. It will have $20 billion in assets, 250,000 employees and projected revenues in 1984 of $24 billion.

James E. Olson, vice chairman of A.T.& T. and chairman of A.T.& T. Technologies, noted that the company will no longer need a manufacturing and supply arm after Jan. 1 because ''there will not be a Bell System.'' But, he added, ''All those factories, those skills, are still in place.''

Mr. Olson added that the submersion of Western Electric in the rest of A.T.& T. in no way foreshadowed any similar fate for Bell Labs, A.T.& T.'s research arm.

Little Financial Impact Seen

The corporate reorganization is expected to have little direct financial impact, although analysts said it could achieve some cost savings.

''There was beginning to be an awful lot of duplication in their corporate structure,'' said Ivan Wolff, a telecommunications analyst at Donaldson, Lufkin & Jenrette. ''This should eliminate double overhead.''

But more important than the financial impact, Mr. Wolff suggested, is the strategic choice A.T.& T. has made. ''They could have allowed Western Electric to take over the rest of the organization,'' he noted.

''The fact that they did it this way is a recognition on their part that marketing and software are more important, and hardware is less important, he said. ''It is a requirement, but it is not the whole game.''

Mark Luftig, an analyst at Salomon Brothers, added, ''Basically, A.T.& T. seems to be modeling itself after I.B.M.''

The projected end of Western Electric as a company created more of a stir among students of industry than on Wall Street.

'The End of an Era'

Charles A. Myers, an industrial organization expert and professor emeritus at the Massachusetts Institute of Technology, saw the move as ''the end of an era, of a company known for its forward-looking management and employee relations.''

And D. Quinn Mills, a professor of business administration at the Harvard Business School, said, ''It's one of the largest industrial organizations and one of the most successful, and it will be sorely missed. But this makes a lot of sense. I've been waiting for it to happen.''

Western Electric was founded in 1869 in Cleveland. Among its early products were the first commercial typewriter and Thomas Edison's ''electric pen,'' a forerunner of the mimeograph machine.

A.T.& T. bought Western Electric in 1881, and in this partnership, Western grew into a corporate giant. Taken alone, it ranked as the 22d-largest industrial corporation in America at the end of 1982, with 20 manufacturing sites, 28 service centers and some 150,000 employees.

During its corporate lifetime, it manufactured more than 335 million telephones and produced more than 1 billion circuit miles of wire.

Aside from its sheer bulk, Western Electric was also one of the most studied corporations in the United States. Its Hawthorne Works in Cicero, Ill., was the site of a landmark study in industrial relations.

Researchers there found that productivity rose as the light was increased, but that it did not fall as the lights were turned down again. They realized that the change in output had nothing to do with the level of light, but with the extra attention being paid to the workers.

''The Hawthorne Effect rippled through industrial relations literature,'' Professor Myers remarked.

The demise of Western Electric comes against a backdrop of recent financial losses, plant closings, and layoffs. In the third quarter of 1983, the company reported a loss of $165.6 million, most of it attributable to a strike that shut manufacturing and service operations for three weeks in August. In 1982, Western Electric earned $337 million on revenues of $12.6 billion.