NEC’s Jones’ Latest Mission: Shaping Up O.C. Company
On Wednesday, Gen. David C. Jones will fly to Chicago on an important fact-finding mission.
The former chairman of the Joint Chiefs of Staff has traveled to the Soviet Union for arms talks, accompanied a presidential adviser to Saudi Arabia to campaign for a Middle East peace treaty and served as a member of a task force trying to ensure free elections in Panama.
Jones’ trip Wednesday is of a slightly different nature--his assignment is to remove National Education Corp.’s largest subsidiary from a morass of problems and then mold it into tiptop shape.
Unexpected Losses
Two weeks ago, Jones became NEC’s chairman after the Irvine-based company ousted former chairman and chief executive H. David Bright. The ouster followed news of an unexpected $1.5-million loss in the second quarter ended June 30. Revenue fell 8% to $96.6 million from $105 million in the same period a year earlier.
The company’s stock closed Monday at $15.75, substantially below its 52-week high of $29.75.
National Education is the nation’s largest provider of educational training services and employs about 5,200 people. The company’s schools and educational materials encompass a wide variety of subjects, including telecommunications, avionics, word processing and computer science.
Jones--who as head of the Air Force reduced headquarters staff in the 1970s by eliminating thousands of military and civilian jobs--said in an interview Monday that he is implementing a cost-cutting program at NEC that may include job cuts accomplished through attrition. His first move will be selling the corporate jet.
The company’s poor second-quarter performance and sliding stock price are largely blamed on Applied Learning Inc., headquartered in Naperville, Ill. NEC merged three separate companies to create Applied Learning, which it hoped would extend its reach beyond vocational education to corporate training.
So far, Applied Learning appears to have done more harm than good, costing NEC millions of dollars because of computer snafus and a disorganized sales staff. The company’s customers were either overbilled, undercharged or given services gratis.
“The data system broke down,” the 69-year-old Jones said. “We have got a lot of work that has been done that we haven’t billed our customers for yet. We were slow in billing, we were inaccurate sometimes in billing.”
The sales forces of the three companies were just as jumbled. “We found that in a number of cases we had multiple salespeople working the same company from different directions,” Jones said.
“The basic strategy of moving into corporate and industrial training is the right one,” Jones said. “It’s yet to be determined how well we do it and how well we execute it. But I’m not ready to say that any acquisitions turned out to be the wrong thing to do. The integration of the three companies was a more difficult job than I think was anticipated.”
Sweeping Changes
Jones knows all too well the problems with separate organizations trying to work as one unit. After serving as chairman of the Joint Chiefs from 1978 to 1982, Jones began a campaign for sweeping changes in the military to end the turf wars between the Army, Navy and Air Force. Three years ago, many of his ideas were signed into law by President Ronald Reagan.
Nevertheless, his appointment as National Education’s chairman got a lukewarm response on Wall Street because his business experience is limited to serving on the boards of companies such as General Electric and USX Corp.
“He has obviously run very large organizations,” said Arthur Rade, analyst with the brokerage Merrill Lynch, Pierce, Fenner & Smith, in New York. “I don’t know if you would consider those organizations as having a profit responsibility though.”
Jeffrey Kessler at the brokerage of Shearson Lehman Hutton in New York agreed. “He is viewed kind of nebulously on Wall Street. Despite the fact that he was chairman of the Joint Chiefs of Staff, many people don’t know whether he is any good as a businessman.”
A Neutral Figure
Some financial analysts said Jones was chosen as chairman by National Education’s board because the board was split over Bright’s dismissal and Jones was viewed internally as a neutral figure. Furthermore, the board believed that Jones has the leadership skills to put National Education back on the right track in the near future.
“Jones is good for settling the whole place down. He can put them on a much steadier course than they have been on in the last year,” Kessler said. “My feeling is that Jones will be there for an intermediate time but not a long period of time.”
To date, Jones’ biggest announcement has been the return of former NEC president Jerome Cwiertnia, who left that office last March for what he said were personal reasons. Company insiders and analysts said Cwiertnia often clashed with Bright.
“Jerry Cwiertnia is respected internally and very respected on Wall Street,” Jones said. “The leadership is now in position.”
Besides his cost-cutting program, Jones revealed very few specifics in mind for how to turn around National Education.
“There is no field to be in currently that I think would be better than education and training. We have got a lot of education problems in this country. Much of the work force needs to be better trained or retrained. So we are in the right business,” he said. “We just need to do a better job.”
