Credit Unit Not for Sale, TRW Says : * Technology: The Orange County operation, recently criticized by consumer groups, is under ‘strategic review.’
TRW Inc. said Friday that it is conducting a “strategic review” of its Orange County-based consumer credit reporting business but has no imminent plans to sell the 2,000-employee operation.
The statement came after TRW Chairman Joseph T. Gorman was quoted in Friday’s editions of the New York Times as saying that the company was weighing whether to sell the unit, partly because of recent criticism from consumer groups and government officials.
“We need to take some strategic action,” Gorman was quoted as having told an assembled group of business editors.
But officials of the Cleveland-based technology giant said Friday that the “action” consists of nothing more than the regular scrutiny that is applied to all of multifaceted TRW. The company’s activities range from building satellites to manufacturing steering gear for trucks.
“TRW is continuing these reviews but has no plans to sell the credit reporting business at this time,” the statement said.
The company acknowledged that Gorman said TRW’s credit bureau--one of the nation’s three largest--was not performing up to expectations. It added, however, that the operation has potential for good profit margins and that TRW is an industry leader.
TRW’s information and services business earned $49 million on sales of $760 million in TRW’s 1990 fiscal year, a 19% decline in earnings. At the time, the company blamed the decline on a downturn in the credit and real estate markets.
Credit operations are relatively small part of TRW’s overall business. The Information Systems & Services Division, of which the credit bureau operation is a large part, contributed 9% in both sales and operating profits to the company last year with the remaining 91% divided between automotive products and aerospace.
Small compared to TRW’s other divisions, the credit bureau operations has brought loads of bad publicity to the company recently because of a burgeoning outcry concerning its practices regarding the collection and dissemination of financial data on individuals.
The attorneys general of six states, later joined by seven others, filed two lawsuits last month that accuse the company of failing to fix errors in consumer credit records and other alleged misdeeds. Legislation introduced in Congress would clamp costly new requirements on TRW and other credit bureaus.
TRW has reacted by announcing plans for a toll-free hot line and other steps to appease angry consumers. But it has not gone as far as competitor Equifax Inc., which recently decided to stop selling credit-derived data to junk mail marketers.
Given TRW’s troubles, consumer advocates said Friday that they are not surprised that the company broached the possibility of unloading its credit operations.
“It’s understandable,” said Evan Hendricks, the Washington-based publisher of the Privacy Times newsletter. “TRW’s performance has been so anti-privacy and arrogant that of course it’s become an embarrassment to the parent company. Now that the spotlight is on them, they are probably ready to dump it.”
Analysts said the negative publicity is taking its toll and that TRW’s credit bureau has not lived up to its potential.
“In effect, the impact of this kind of scrutiny is . . . to limit the growth opportunities and to increase the costs associated with the business,” said Eli S. Lustgarten of PaineWebber Inc. in New York.
He noted that some of TRW’s attempts to expand its credit bureau business, such as the Credentials service that allows consumers to monitor their credit report for a $39-a-year fee, have not been very successful. Credentials, and a similar service, Monitor, have attracted only about 1% of the 150 million individuals on whom the company keeps credit records.
