Westinghouse Suffers $1.48-Billion Loss During 3rd Quarter : Manufacturing: Citing bad real estate investments, the firm also said it plans to slash 4,000 jobs to help cut costs.
Westinghouse Electric Corp. stunned Wall Street on Monday with a dire earnings report, saying that it lost $1.48 billion in the third quarter because of sour real estate investments and that it planned to slash 4,000 jobs to bring costs down.
The announcement sent Westinghouse’s stock tumbling 12% on the New York Stock Exchange and it knocked down blue chip stocks--already losing ground on worries about third-quarter earnings.
The Pittsburgh-based company said the loss arose because of a $1.68-billion charge at its Westinghouse Financial Services Inc. subsidiary. The charge covers the falling value of commercial real estate and troubled loans held by the unit.
The job cuts--about 3.4% of the company’s work force of 116,000--are part of a broader restructuring program meant to save $200 million a year. Westinghouse took an additional $160-million charge against quarterly results to pay for costs associated with the job cuts.
The conglomerate has been wrestling with problems at its financial subsidiary since early this year. In February, it announced it was taking a charge of $975 million to cover losses and cutbacks in financial services.
Westinghouse shares dropped $2.625 to $19.125 on the New York Stock Exchange, where it was the second most active issue.
The recession and weakness in commercial real estate--where the supply of new office space far outstrips demand--have seriously hurt banks, savings and loans and other financial institutions.
Although the latest action will allow Westinghouse to clear up some problems in financial services, the company’s chairman would not promise they were over.
“If somebody could tell me what the real estate markets were going to do and what the economy was going to do, I could better answer the question,” Chairman Paul Lego told a news conference. But he said the moves, and new management at the subsidiary, should allow Westinghouse to concentrate on other areas.
Under the program announced in February, Westinghouse has sold off about $750 million in securities and $100 million of real estate, Lego said.
He would not say whether Westinghouse would cut its dividend to save cash or specifically identify assets to be sold. Westinghouse said it would be picking up the pace of asset sales as part of the restructuring.
