Businessweek Archives

From The Gulf War To The War On Crime


The Corporation

FROM THE GULF WAR TO THE WAR ON CRIME

Last March, a small, slow-flying aircraft lifted off a runway near Baltimore and headed southwest. It was no ordinary plane. Its big, bulbous nose was crammed with radar and infrared sensors. Its cabin was packed with computers and communications gear. And its mission was as unusual as its appearance: to spy on David Koresh and his Branch Davidians, who were barricaded in their compound at Waco, Tex.

As it turned out, the debut of Westinghouse Electric Corp.'s multisensor surveillance aircraft wasn't exactly a dazzling success. Koresh's enclosed compound didn't lend itself to surveillance from the air. The plane's sensors merely confirmed that there were people inside the buildings. Still, Westinghouse was determined to take advantage of the opportunity to introduce the plane to the federal agents gathered in Waco.

Westinghouse hopes that such demonstrations can drum up new business for its slumping defense unit, the Baltimore-based Electronics Systems Group. Struggling along with other defense contractors to adjust to the post-cold-war era, Westinghouse is gradually converting much of its military hardware for use by law-enforcement agencies to help offset the steady drop in Pentagon spending. "A lot of people think of conversion as Grumman [Corp.] building buses," says Richard A. Linder, head of Westinghouse's defense business, referring to an ill-fated diversification by the aerospace contractor. "But if you're in electronics, you have multiple options."

DRUG SENSORS. So far, Westinghouse's biggest crime-fighting success has come in the home-security market, where it is second only to ADT Security Systems in the number of households it serves. And though the company has yet to sell much of its high-tech gear to U.S. law-enforcement agencies, Linder is betting that orders will start rolling in over the next couple of years once police departments see the effectiveness of the company's gadgetry--and its wide range of products. Several agencies say they'd be interested once the products are perfected.

In addition to the surveillance aircraft, the company is also developing handheld biosensors that police can use to detect traces of drugs and bombmaking chemicals on a person's skin and clothing. Also on the drawing boards: computers to link police cars directly to FBI headquarters and provide officers in the field instant information, including fingerprint analysis (table).

The new strategy at the defense unit, which accounts for a third of its parent's revenues, is critical to Westinghouse's long-term health. Following disastrous real estate losses at Westinghouse Credit Corp., the Pittsburgh-based company desperately needs new business. Analyst Nicholas P. Heymann of NatWest Securities Corp. estimates that operating earnings could rise by 7% this year, to $800 million, but overall revenues may slip 2%, to $8.3 billion.

The way Linder sees it, Westinghouse's defense business was a victim not only of Pentagon cutbacks but of its own success. During Operation Desert Storm in 1991, company executives prided themselves on the performance of the huge AWACS surveillance planes that were loaded with Westinghouse radar, heat sensors, and communications gear. But Linder says the accuracy of the high-tech weaponry during the gulf war convinced Congress and the public that the military was well-equipped. Consequently, most of the budget cuts came out of procurement. NatWest's Heymann estimates that sales at Westinghouse's defense unit could drop by 9% this year, to $2.6 billion.

To help reverse that decline, Linder decided to go after nonmilitary markets. Law-enforcement agencies were seen as a natural extension of Westinghouse's existing customers, Linder says, since the military and police often perform similar tasks. And by adapting its existing technology, Westinghouse could avoid the cost of developing entirely new products, says Linder, 62, an electrical engineer who has been with Westinghouse's electronics unit for 35 years.

The surveillance aircraft Westinghouse flew down to Waco, for example, is a cut-rate version of the AWACS. Instead of using a huge Boeing 767, Westinghouse has loaded its high-tech equipment into a British-made Britten-Norman twin-engine turboprop. The plane may not have the range or sophistication of an AWACS, but it still boasts elaborate radar and sensor systems. And at $10 million a plane, it's a bargain compared to the more than $200 million for an AWACS.

Even that price tag may be too steep for local police departments. But Linder sees potential uses for the plane by federal agencies that want to monitor illegal immigration or drug smuggling. The Forest Service has also expressed interest in the plane for the detection of forest fires. There's also the foreign market to consider. In June, Westinghouse sold its first surveillance aircraft to the Turkish government.

PROBABLE CAUSE. Adapting its sensor technology, Westinghouse is also trying to perfect a new handheld biosensor to detect minute traces of cocaine. By wiping a small brush across a suspect's skin or clothing and then inserting the brush into an electronic box the size of a calculator, a police officer can know, in a matter of seconds, whether the person has been in contact with drugs. Also in the works is a sensor to detect nitroglycerin, a chemical used in bombs.

Westinghouse says the new gadgets would help police establish probable cause for a wider search. But some police officers aren't so sure. "If you don't have probable cause in the first place, that tool would be useless," says James Dickerson, of the Pittsburgh Police Dept.'s Narcotics Div. Baltimore police, who are testing the biosensor, currently ask a suspect's permission before using the device.

The company still faces some long-term hurdles. States and local municipalities are wrestling with the kind of budget constraints that forced the Pentagon to cut spending. But Westinghouse believes it can price its products low enough to sell. The biosensors will sell for $2,000 apiece.

PRICE WAR. For the moment, however, sales in the security market are easier to come by. Westinghouse has landed some big corporate and government clients, including the U.N., for its electronic locks and alarms. It has done even better with homeowners, thanks to bargain pricing. For $95, it offers homeowners a system that includes a control panel, a battery backup in case of a power failure, window and door contacts, and a motion detector. Installation is included. For an additional monthly fee of $24.95, the system is linked to a central command station in Dallas. If an alarm is tripped, Westinghouse will alert the local police department or fire department. The company currently serves 200,000 homes, with an additional 8,000 signing on every month.

Still, the competition is fierce. Rivals say Westinghouse's basic $95 package is essentially a loss leader that lets the company hold on to market share in the face of a flood of new competitors. "You're losing money when you sell that system," says Steve Arnholt, director of home automation for Honeywell Inc., a close competitor. Westinghouse denies that it's losing money on the package.

Linder acknowledges that it will be a while before Westinghouse's push into law enforcement and security generates meaningful results. Still, he says he wants half of the defense unit's revenues to come from the civilian sector by 1995, compared with 30% today. Westinghouse is also pursuing other nonmilitary projects. It's working with Chrysler Corp. to develop electric vehicles and is building cellular and satellite phone systems for such customers as McCaw Cellular Communications Inc. Over the long haul, though, Westinghouse is betting that the big profit growth for its defense unit will come from fighting the enemy within, not the enemy without.Stephen Baker in Baltimore


We Almost Lost the Nasdaq
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus