PROFILE : Charting Litton’s Future : New CEO Sees Defense Contractor in a Buy-or-Die Situation
John M. Leonis spent three decades quietly climbing the ladder of the defense electronics division of Litton Industries, eventually becoming its top executive in the late 1980s. Each promotion came with minimal publicity--which is how Leonis wanted it.
“I’m not a hermit, don’t get me wrong,” he said in a recent, rare interview. “But I have never had the urge to seek recognition outside the company. If you go to Washington and ask (people) who I am, you’re going to get some blank stares.”
No more. Leonis, 60, last month was named president and chief executive of Beverly Hills-based Litton, which has shed its old conglomerate structure and is now primarily a defense contractor with two main lines: the electronics business and naval shipbuilding.
So, Leonis now has not only the high profile accorded any top executive, he is also under pressure to explain to investors how his company will prosper even as Pentagon spending continues its long decline.
His solution, it turns out, is simple as well as familiar in the defense business these days: Buy or die.
With Litton’s sales flat and its growth prospects limited, Leonis has decided that he must acquire other defense businesses if the company has any chance to grow. “Your shareholders look for you to do something besides stay stagnant,” Leonis said.
His success will determine whether Litton remains a key part of California’s aerospace and defense industry, even if its venerable role as one of America’s most glamorous conglomerates--underlined by its famous neo-Colonial headquarters building--ended years ago.
While Leonis is not a familiar name, his selection did not surprise followers of Litton, which still has sales of $3.5 billion and 32,000 employees, including 3,350 in the Los Angeles area, mainly in Woodland Hills where its navigation and guidance electronics group is based.
A stocky, balding man with a salt-and-pepper mustache and a demeanor both reserved and direct, Leonis has already led the defense electronics side of Litton’s business through wrenching cutbacks brought on by the decline in military budgets.
“That’s the division that’s faced the most severe challenges in terms of downsizing,” said Byron K. Callan, an analyst at Merrill Lynch & Co. “Having gone through that experience, Leonis is one who’s not going to dillydally if there are tough decisions to be made in the future.”
Until recently, Litton retained vestiges of its conglomerate era. Beside defense, it was involved in such commercial ventures as providing energy services and industrial automation gear. Those lines grew increasingly successful, thanks to aggressive investments from Litton that came at the expense of its defense operations.
Litton decided that for the defense and commercial lines to expand, they needed to be pulled apart. On March 17, Litton organized the commercial units into a new company named Western Atlas, while the “new” Litton kept the defense businesses.
Litton’s management divided as well--former chief executive Alton Brann moved to Western Atlas--and that gave Leonis his opening to step up to Litton’s top post. Another pending change: Litton will move its headquarters to Woodland Hills this fall, with Western Atlas taking over its Beverly Hills space.
Litton’s electronics group makes navigation, guidance and communications gear for a variety of military and commercial aircraft, including the Air Force’s F-22 stealth fighter, now under development, and Airbus’ A340 passenger jet.
Litton’s Ingalls shipbuilding unit in Pascagoula, Miss., is a leading producer of destroyers, cruisers and amphibious assault ships for the Navy. Ingalls’ order backlog today is strong at $4 billion--roughly four years’ worth of production.
But in its fiscal year ended last July 31, Litton--excluding the spun-off Western Atlas--posted operating earnings of $144 million (before taxes and a one-time accounting change), unchanged from the previous year. Sales slipped from $3.7 billion to $3.5 billion.
Litton is looking to buy not so much another company but certain product lines that would fit with Litton’s divisions and not burden Litton with too much debt.
“We may be buying a company, but I don’t see us out looking to buy a Grumman,” Leonis said, referring to Northrop’s recent purchase of Grumman Corp. for $2.2 billion.
Leonis’ acquisition plans call to mind Litton’s early days in the 1950s and ‘60s, when the company was made famous by executives Charles (Tex) Thornton and Roy Ash. They used a spree of takeovers to build Litton into a provider of everything from gyroscopes to typewriters to medical syringes--and made themselves legends in the process.
Thornton he’s not, but Leonis still must make it clear to Litton’s stockholders, employees and Wall Street followers that his strategy has the same merit for the 1990s that Thornton’s had in his era, analysts said.
“One of Leonis’ priorities must be to go out and convince people of the vision he has,” said R. Jackson Blackstock, analyst at CS First Boston.
At the same time, Leonis is not under pressure to immediately improve Litton’s performance, some observers said.
“I don’t think anybody will say John Leonis will have to show instant results,” said William C. Edwards, a Menlo Park venture capitalist who was a director of the “old” Litton before moving to Western Atlas’ board. “He’ll do well over time.”
Leonis, who often leaves work with two briefcases of documents to review overnight, is a Whittier native who graduated from Hamilton High School in Cheviot Hills, a couple of miles south of his current office at Litton’s headquarters.
“The home I grew up in is 2 miles from here,” said Leonis, whose father was a professional photographer. “It’s still in the family. My oldest daughter lives there.”
Leonis earned an electrical engineering degree from the University of Arizona in 1959 and went to work for Litton. He has been there ever since except for a brief sojourn to Teledyne Inc. in the late 1960s.
Though his ascent through Litton’s ranks went largely unpublicized, it has brought Leonis other comforts, including homes in eastern Ventura County, the desert and the mountains. The locales accommodate Leonis’ passion for skiing and hiking.
But he won’t have much time to relax. Though not under orders to make a blockbuster acquisition tomorrow, he said his directors “do expect me, and I expect of myself, to make good progress . . . over the next year to 18 months.”
Bio: John M. Leonis
* Age: 60
* Birthplace: Whittier
* Education: Hamilton High School in Los Angeles; bachelor’s degree, electrical engineering, University of Arizona, 1959
* Family: Married, three children
* Residence: Eastern Ventura County
* Resume: Joined Litton Industries as an engineer in 1959. Named vice president of engineering for guidance and control before being promoted to division president in 1986. Elected corporate vice president in January, 1988, and promoted to group executive of navigation, guidance and control systems two months later. Named senior vice president in 1990. Elected president and chief executive in March, 1994.
* Business strategy: Wants Litton to buy defense-related assets that will enable the company’s sales to grow despite continued Pentagon budget cuts.
* Quote: “Through the years in middle management, I kept a low profile. You keep a low profile by running an organization successfully. It doesn’t get any attention because of problems.”
Litton Industries at a Glance
Litton Industries in March spun off its commercial operations into a new company named Western Atlas, while keeping its defense businesses. Here is a look at the remaining Litton Industries.
Headquarters: Beverly Hills
Employees: 32,000
Sales: $3.5 billion*
Profit: $65.2 million**
Main products: Surface combat ships, including Aegis destroyers; defense electronics, including airborne electronic warfare systems and aircraft navigation systems.
Major plant sites: Pascagoula, Miss. (shipbuilding) and Woodland Hills. (defense electronics).
* Fiscal year ended July 31, 1993
** Includes $107-million charge related to accounting changes.
Source: Litton Industries
