Loews Corporation

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Loews Corporation

666 Fifth Avenue
New York, New York 10103
U.S.A.
(212) 841-1000

Public Company
Incorporated: November 12, 1969
Employees: 21,900
Sales: $6.7 billion
Market Value: $5.801 billion
Stock Index: New York

The Loews Corporation is a $6.5 billion conglomerate, with extensive interests in tobacco, insurance, movie theaters, watches, and hotels. Recently it has also invested heavily in broadcasting and oil tankers. With such large operations one would expect Loews to be managed like any other conglomerate. However, this is not the case. The Loews Corporation is a family business. The principle owners, Bob (Preston Robert) and Larry Tisch, are brothers. The former is president and chief operating officer; the latter is chairman and chief executive officer. A number of Tisch offspring have also become prominent members of the company’s management.

This does not mean that the Tisch family supervises the day-to-day operations of the corporation. Rather, the company functions through a network of divisions which exercise a large degree of autonomy and assume responsibility for performance. Initiative and innovation are encouraged and rewarded. However, when something goes wrong the problem is brought quickly to Bob Tisch’s attention. There is no administrative labyrinth in which to lose or hide operational defects. “Loews is a big business run like a small business,” Tisch says. “I hope we can keep it that way.”

The Tisch brothers were given an early business education by their father, Al, who owned a children’s manufacturing plant in Manhattan. Bob and Larry were given the task of making phone sales to retail stores and wholesale distributors. The two brothers also helped operate a few summer camps their parents owned in New Jersey.

This “hands on” experience was coupled with formal training. Bob, after a brief hiatus spent in the Army, graduated with a degree in economics from the University of Michigan in 1948. Larry, at 18, graduated cum laude from New York University’s School of Commerce and then went on to receive a Master’s in business administration from the Wharton School in Philadelphia. Later he enrolled in Harvard’s law school.

In 1946, Al and Sadye Tisch sold their summer camps and purchased the Laurel-in-the-Pines Hotel in Lake-wood, New Jersey. The hotel business went well, and soon became more than the parents could handle alone. As a result, Larry dropped out of Harvard in order to help run the business and Bob soon followed. Soon afterward, the older couple decided to sign over their share of the hotel (worth about $75,000 at the time) to their sons and give them control of the operation.

It was not long before the brothers were leasing two other small New Jersey hotels and making a profit. Then, in 1952, they acquired two grand but old hotels in Atlantic City called the Brighton and the Ambassador. One they tore down to build a motel in its place; the other they quickly resold at a profit. Later, the Tischs liquidated some of their New Jersey investments to purchase their first two hotels in New York City.

In 1956, with only eight years experience in the business, Bob and Larry erected the $17 million Americana Hotel in Bal Harbour, Florida, and paid for it in cash. Although it was subsequently sold to Sheraton, it represents an important step in the success of the brothers. With the Americana, they firmly established themselves among the major hotel operators. Later the brothers obtained such prominent hotels in the United States as the Mark Hopkins, The Drake, the Belmont Plaza, and the Regency.

In 1959 a major anti-trust ruling forced Metro-Goldwyn-Mayer to relinquish ownership of Loew’s Theaters. This decision created an opportunity for the Tisch brothers, allowing them to move into a new business area. Six months before MGM was to divest Loew’s, Bob and Larry purchased a large amount of stock in the theater chain; by May of 1960 they had gained control of the company.

The brothers did not enter into the theater business because they knew about the motion picture industry. Nor did they purchase Loew’s because it was already a profitable operation on its own. On the contrary, Loew’s theaters were losing money. They were large, multi-tiered movie houses with high ceilings and interiors reminiscent of another age. They played only one motion picture at a time and were rarely filled to capacity. Television and the proliferation of material coming out of Hollywood meant that theaters would have to cater to various tastes simultaneously in order to secure larger audiences. The old Loew’s theaters were not designed for this purpose.

The reason Bob and Larry Tisch purchased Loew’s had to do with real estate. The Loew’s theaters, though antiquated, were located on valuable city property. It was the opportunity to acquire this valuable property that prompted the brothers to purchase the company.

Almost immediately they began transforming the theaters into liquid assets, demolishing 50 of them in a matter of months and then selling the vacant lots to developers. This, of course, hastened the demise of the palatial movie house, but it was nonetheless a necessary business tactic. Loews (the apostrophe has since been eliminated) remains a prominent participant in the movie industry with theaters in 26 metropolitan areas. However, its 143 screens are located in only 61 facilities. There are often four screens in one building, each showing a different movie.

The Loews name, established and well-recognized, became the corporate title under which all Tisch operations (including hotels) were placed. The new Loews Corporation ran smoothly and efficiently, turning substantial profits every year. By 1968 the brothers again had the capital and the inclination to diversify and invest in a new business sector. This time they acquired Lorillard Industries, America’s oldest tobacco manufacturer.

Lorillard, the maker of Kent and Newport cigarettes, had once been a major company with a large share of the tobacco market. However, managerial incompetence and discord had paralyzed the company, almost bringing it to full collapse. Upon assuming control of Lorillard, the first thing Larry Tisch did was examine the firm’s subsidiaries, particularly its candy and cat-food divisions which were consuming a disproporionate amount of resources. The brothers discovered that the top executives spent 75% of their time on candy and cat-food, which together made up only 5% of Lorillard’s total business. Lorillard divested itself of these interests and the executives who were so fond of them. Larry and Bob Tisch then redirected the company toward its tobacco operations. Market share slippage was reversed, and Lorillard today is America’s fifth largest tobacco company.

A similar scenario took place in 1974 when Loews acquired CNA Financial, a large insurance firm. The Chicago-based conglomerate reported a $208 million deficit that year and was looking to lose more. Like Lorillard, its subsidiaries were draining the financial resources of the company. CNA’s tangential interests were poorly managed and veritable “money pits.” Moreover, there was considerable waste at the top of CNA’s corporate structure.

When Loews took charge it “weeded out the bad subsidiaries and concentrated on the ones it could save.” The Tisch brothers then took aim at the wastefulness that plagued CNA’s headquarters. Money executives were fired as Tisch austerity measures prevailed over past CNA lavishness. The 3,000 square foot suite of the former chairman was rented out, as was the corporate dining room. The streamlining had a dramatic and positive effect. In 1975 CNA earned a $110 million profit, and has been financially sound ever since. It now does over $3 billion in business.

The next major acquisition for Loews was Bulova watches. For $38 million the brothers acquired 93% of the company in 1979. Like the other Loews subsidiaries, Bulova was then a financially troubled company with an image problem. Due to quality control problems it had been supplanted by its chief competitor Seiko. The introduction of Pulsar and similarly priced Timex watches put added strain on Bulova’s already dwindling market share. Its name was simply not recognized by the new generation of consumers.

The Tisch brothers applied their proven method of managerial restructuring, but without total success. The problems went beyond personnel and corporate networks; the product itself needed to be revised. James Tisch, Larry’s son, headed the operation and immediately introduced 600 new watch styles, complete with extended warranties. To deal with the image problem an extensive advertising campaign was conducted. The company recovered, but slowly. By 1984 it had cut its losses to $8 million (roughly half of its 1980 total), yet it was still not paying for itself. Not until 1986 was the company able to turn a profit.

When not tending to the operations at Loews, Bob and Larry Tisch lead separate lives. Bob is heavily involved in public service. He is one of New York City’s most vocal supporters and has been elected over 15 times to the chairmanship of New York’s Convention and Visitors Bureau. It was Bob Tisch and the Bureau’s president, Charles Grillett, who came up with the idea of using an old jazz expression, the “big apple”, to represent New York City.

In 1986 Bob Tisch unofficially left Loews to accept an appointment as U.S. Postmaster General. Despite the doubts of those who feel his absence will weaken the company’s performance, most analysts contend that Bob Tisch’s move to Washington D.C. will help Loews, citing the advantages of both political and financial connections.

Late in 1985 Larry Tisch purchased a large amount of CBS stock to help the company fight a takeover attempt by Ted Turner. Throughout 1986 Tisch increased his share holdings in CBS and obtained a seat on the board of directors. In September of that year he was elected president of CBS, much to the pleasure of stockholders and employees who had grown frustrated and uneasy during the Turner takeover attempt.

Tisch’s popularity was short-lived, however. Intending to operate CBS as if it were any other business, he took measures to alleviate waste and make CBS more cost-effective. Wage and expenditure reductions, along with wholesale firings, caused a serious rift in the huge broadcasting firm. The news division, traditionally given considerable leeway in regard to fiscal accountability, was especially hard hit. Only time will tell if Tisch will be able to mend CBS without sacrificing the people and principles that once made it the most respected of the three major American broadcasting networks.