Last week, Jose Emeterio Gutierrez, who has spent the past 10 months as the interim president and CEO of the recently bankrupt Westinghouse Electric Co., began a tour of the nuclear energy company’s sites.
His mission is to educate the anxious workforce — which numbers 4,500 in the Pittsburgh region — on how the Cranberry-based firm ended up filing for Chapter 11 bankruptcy protection last month, as well as gather feedback and impart some of his ceaseless optimism. The paychecks will keep coming, he said.
In his estimation, the bankruptcy process is working. “What I told them is, the day after we filed all the factories continued working, all of our offices — they’re open,” Mr. Gutierrez said. “Obviously, what I told them is we have to fix this problem.”
The big problem is a pair of nuclear construction projects in Georgia and South Carolina — the first two such ventures in the U.S. in three decades — that have been delayed and have cost billions more than expected.
With $800 million in bankruptcy financing, he told employees in Churchill and Blairsville last week, the company has enough money to run its profitable businesses while it works to shed the shadow of the construction problems.
‘A better company’
Toshiba Corp., which bought Westinghouse in 2006, has put its stamp on the nuclear firm’s sprawling headquarters in Cranberry, where three flags fly in front of the entrance: American, Pennsylvanian and Westinghouse.
Inside, Japanese souvenirs, dolls, and fans printed with Westinghouse and Toshiba logos are displayed in glass cases. A sculpture of a bear biting a fish commemorates a gift from Japanese Steel Works Ltd. “For a long lasting partnership,” the inscription says.
In recent weeks, Toshiba has made it a point to distance itself from Westinghouse. Its leaders have said the nuclear firm’s future will be hashed out in bankruptcy court, with Toshiba leaving the vision and bid solicitation to Westinghouse’s management.
Mr. Gutierrez has come to see this as a learning process, deploying corporate terms like “opportunity to make the company stronger, fix some of the problems” and emerge in “better shape, more competitive, leaner.”
“I’m becoming more and more optimistic as we go through this process that Westinghouse will be a better company at the end,” he said.
“It’s a reality that we have this problem with the construction of the US AP1000 projects, but it’s also true that the rest of the company is in good shape,” he said. “It’s a healthy business. We don’t have significant problems. We don’t have business interruptions. We don’t have customers walking away.
“As soon as we clean the house a little bit,” he said, “we will be ready to get out of this process. It’s not going to be too long. But when you are in court, you never know. And then, I was advised not to speculate.”
The Westinghouse headquarters in Cranberry. (Darrell Sapp/Post-Gazette)
Cutting costs and morale
For those cringing at the words “leaner” and “clean the house,” as code for layoffs, Mr. Gutierrez said the company isn’t planning anything big.
“But obviously, we have to look at our businesses,” he said.
Current and former employees have expressed frustration with the company in recent months, citing rapidly deteriorating morale and a high-pressure crunch to show progress on the nuclear construction projects in the South.
Overtime work has increased to the point where it feels mandatory, some have said, all while pension contributions have stopped and other benefits have been cut.
The company has reduced travel, cut discretionary spending and called off attendance at conferences.
“Obviously, it’s not an easy time,” Mr. Gutierrez conceded.
“When we realized that we had a $6.1 billion problem, we decided to go ahead with some immediate actions,” he said. “When you’re in this situation, you have to adapt the labor conditions to the realities.”
Today, with the help of a turnaround specialist brought in a few months ago, Westinghouse is looking over its entire business model and trying to identify underperforming businesses, Mr. Gutierrez said. And grow its promising ones, he added.
Some years ago, Westinghouse identified an opportunity in decommissioning and dismantling of nuclear power plants. In the U.S. alone, there are half a dozen plants in danger of early retirement, not to mention fleets in countries like Germany that are phasing out nuclear power altogether after the Fukushima Daiichi disaster.
Today, that business brings in just shy of $100 million a year, Mr. Gutierrez said, but it could easily double or triple in the next few years, he said.
“The market is huge. Also, it’s not a market that is short term,” he said.
Another target for growth is government services, such as operating government labs and nuclear facilities.
It would be a return to the field for Westinghouse, which once dominated the segment. Its first recent break came last September when Westinghouse was chosen as part of a consortium to operate government sites in Kentucky and Ohio that store depleted uranium hexafluoride.
That work is just beginning and Westinghouse has bid on several other government projects — “optimistic it’s going to be a good business for us,” Mr. Gutierrez said.
When employees asked about China, where Westinghouse is helping utilities build four AP1000 plants, Mr. Gutirrrez assured them that work will go on as planned. Fuel will be loaded into the new reactors shortly, he said.
In fact, he expects that more AP1000 plants will be built in China, despite delays and cost overruns on those projects, and despite China’s own ambitions to build a similar type of nuclear power plant at home and abroad.
All this will become clearer through the bankruptcy process, Mr. Gutierrez said.
In some ways, the bankruptcy code was designed for situations like the one Westinghouse finds itself in — a company with a profitable core and real problems, said John Gotaskie Jr., a partner with Fox Rothschild LLP in Pittsburgh.
“The code is intended to try and salvage as much as you can from that profitability,” he said.
Even as headlines indulge in nuclear disaster puns to describe Westinghouse’s situation, Mr. Gotaskie said the stigma of bankruptcy continues to diminish.
“As we become much more of a financially engineered world, people see bankruptcy as another process for financial engineering,” he said.
Given Toshiba’s stated goal is to sell Westinghouse, it’s safe to assume that the company is either in negotiations with a stalking horse bidder or will ask the court to set up the framework for a bidding process, Mr. Gotaskie said.
“You never quite know how long these things are going to go on,” he said.
That foreign companies are involved add another layer of complexity and could stretch the timeline for exiting.
Mr. Gutierrez’s promise to his employees is that the company will continue to pay their salaries, invest in technology and make it out of this alive.
“Is there a future for Westinghouse? Of course,” Mr. Gutierrez said. “Is it going be a good future? Of course.”
Anya Litvak: 412-263-1455 or email@example.com.