Patrichi Is the Power at Networks Electronic
The chairman was having lunch with two of his top staff members in the executive dining room of their Chatsworth company. He leaned back, pushed away the fresh lobster he had prepared himself and asked how they would have put out the fire at the Chernobyl nuclear plant.
Neither had any suggestions, so Mihai D. Patrichi, 74, the forceful, mercurial head of Networks Electronic Corp., offered his own solution.
A series of explosions over the Soviet plant, Patrichi said, would have robbed the reactor’s core of the oxygen fueling the flames. He maintained that the radiation would have stayed confined despite the explosions, and the graphite would have stopped burning.
Whether his idea would have worked is highly questionable, but Patrichi didn’t get any argument from his executives. He is accustomed to having his way at Networks Electronic, which makes bearings and explosive devices such as missile igniters. In fact, he takes credit for nearly everything the company has ever developed.
Native of Romania
Patrichi, an ardent anti-communist who fled his native Romania in 1947 and came to the United States a year later, has shaped a company that is almost as volatile as he is. Networks Electronic’s earnings have bounced up and down in tandem with the national economy, and the company posted yearlong losses four times, most recently in 1982 and 1984.
Since founding the firm in 1953, Patrichi has faced a series of tribulations. In 1955, a competitor complained to the Air Force that Patrichi should be barred from the defense industry because he was not a citizen.
The Department of Defense at first agreed, and Patrichi was ousted from his company. He said he was soon reinstated, however, after military leaders came to his aid. In 1960, Patrichi became a U.S. citizen.
Five years later, Patrichi brought in Gen. Curtis E. LeMay, former Air Force chief of staff, as chairman. But, when LeMay became the vice presidential running mate of George Wallace in 1968 on the American Independent Party ticket, Patrichi fired him.
LeMay sued Patrichi in Los Angeles Superior Court for $5 million in punitive damages. The case was settled out of court. Patrichi says he paid LeMay nothing more than his attorneys’ fees.
In May, 1978, Networks Electronic was rocked by an explosion and fire that began in a laboratory. Four workers were injured, one seriously. Since then, Patrichi says, he has supervised worker safety, and the company has had no similar incidents.
Patrichi, who is president and chief executive as well as chairman, says he has also resisted takeover overtures from some of his competitors. But, in 1983, shareholders rejected a measure that would have helped Patrichi thwart suitors by requiring a two-thirds vote to approve a merger. Patrichi, the company’s largest shareholder, held a 34% stake as of last June 30.
Networks Electronic is fighting a Superior Court suit filed in February by Robert G. Bitters, a 13-year company employee and one-time executive vice president. Bitters charges in court papers that he was fired after refusing Patrichi’s orders to lie about the company’s finances to the Securities and Exchange Commission, shareholders and customers.
Bitters, who is seeking unspecified compensatory and punitive damages, would not specify what kind of lies he was alleging. Patrichi denied Bitters’ charge, and said Bitters was fired because he wasn’t generating enough business as sales manager, his last job at the company.
Two Groups
Networks Electronic is split into a division that makes bearings for aircraft landing assemblies and wing attachments, and an ordnance group that makes igniters for launching missiles with names such as Sparrow, Stinger and Copperhead.
The ordnance group recorded pretax earnings of $750,000 on $2.2 million in sales during the last fiscal year ended June 30. The bearings division brings in more sales but has lost money consistently since 1981. The unit lost $181,000 before taxes on nearly $4 million in sales in the company’s last fiscal year.
Networks Electronic’s executive vice president, Edwin J. Turner, attributed the losses to a $5-million investment in new equipment and renovations from 1981 to 1985. Helped by the sale of a quarter of its 10-acre site in Chatsworth to raise development funds, however, the company posted net income of $1.7 million last year. Over the nine months ended March 31, Networks Electronic earned $539,525 on revenue of $4.9 million.
High Real Estate Value
Robert Irwin, president of Buffalo, N.Y.-based Niagara Share Corp., a major investor in Networks Electronic, said he has been disappointed at times with the company’s sluggish orders. Irwin said he also is worried about what will happen when Patrichi eventually retires. But he said his concerns are moderated by what he regards as the high value of Networks Electronic’s real estate.
None of Networks Electronic’s products is longer than a couple of inches or heavier than a few pounds. They come in various shapes, depending on the need. Most are made of stainless steel, although aluminum is increasingly being used.
The bearings are used for pivoting parts in aircraft landing gear, mounting helicopter engines and attaching fighter jet wings. Ordnance parts, including fuses and switches, are packed with explosive powder, then sparked with an electric charge.
About half of the company’s business comes from prime contractors, and the rest is directly with the government. Much of the government business involves replacing parts on older planes.
Networks Electronic employs 143. About 70 are in the bearings division, 40 are in the ordnance unit, and the rest are in engineering and administration.
Reputation for Reliability
Customers say Networks Electronic, which is dwarfed by such competitors as Textron and Minebea, is reliable and responds to orders quickly.
Gerald J. Pedrotty, subcontract manager for Martin Marietta in Orlando, Fla., said Networks Electronic has supplied 40,000 igniter parts for its Copperhead missiles now in production.
“Their designs are innovative. It’s an excellent house. All first-rate jobs,” Pedrotty said.
Patrichi has made out well, through the company’s good years and bad. He received $256,678 in salary and bonuses in the last fiscal year, according to company documents.
Patrichi also has an employment agreement with the company guaranteeing him at least $180,000 a year until he dies.
Sibson & Co. in Los Angeles, a leading compensation consulting firm, said the annual cash compensation for chief executives of companies in Networks Electronic’s size range averaged $130,000 last year.
Niagara Share’s Irwin said he has no qualms about Patrichi’s salary. “He’s a one-man show,” Irwin said.
Patrichi said his pay is warranted by his expertise and hard work. He says he studied mechanical, electrical and aeronautical engineering in Bucharest, and he considers himself the academic type. Certificates for some of his 27 patents hang in the company’s lobby.
Military Background
His developments include varieties of so-called dry-lube bearings that can operate in jet engines without lubrication, despite extreme heat. Patrichi also has developed hermetic seals that unite glass and metal in missile igniters.
Patrichi said he was a pilot in the Romanian air force during World War II and became a technical adviser to Romania’s King Michael, who was forced to abdicate by the postwar Communist government in 1947. Patrichi fled with Michael to Paris before coming to the United States.
He is known as a hard-to-please boss. Not only was Bitters demoted from executive vice president to sales manager, but Turner, for instance, went from an executive vice president position down to marketing vice president for the bearings division before being renamed an executive vice president some weeks ago.
Recreational Chef
A small, vigorous man with a full head of gray hair, Patrichi frequently prepares elaborate lunches for his senior executives and then grills them over the dining room table. Patrichi said he learned about haute cuisine at the Cordon Bleu school in Paris, adding that he regularly buys his groceries on the way to work from his Bel-Air home.
During a recent lunch, Turner refilled Patrichi’s tumbler with Perrier; the ordnance group’s vice president for marketing, Richard Gordon, loaded the dishwasher, and Patrichi embarked on a tirade about why he wanted several big-name customers to pay for their orders cash on delivery.
“I said to them, ‘Go to Minebea. We don’t need you,’ ” Patrichi said, his high-pitched and heavily accented voice cracking. “But they’re coming back. I knew they would. And, when they do, it’s C.O.D. They will pay for everything C.O.D.,” he said, laughing.
