After Long, Sad Decline, Western Union Wants To Change Its Name With BC-Western
After Long, Sad Decline, Western Union Wants To Change Its Name With BC-Western Union-Chronology Graphic
NEW YORK (AP) _ Western Union Corp. remains one of the best-known U.S. companies, the builder of the telegraph network that linked a young nation and helped generations of Americans announce the births, marriages and other milestones of their lives.
But a long, sorry decline has left the 140-year-old company a shell of its former self. Today, it is fighting for its very survival.
Western Union fell victim to technological advances like the fax machine that made its telegrams and telexes almost obsolete. Its decline was hastened by an expensive unionized work force and crushing interest payments on junk bonds it sold in the 1980s to prop up its faltering finances.
Nearing bankruptcy, the company sold the majority of its operations in the past few years. All that’s left of the one-time giant are its money transfer and bill-paying services and several electronic letter-delivery services.
Once the owner one of the largest communications systems, Western Union now sends its services over leased lines. Among the assets sold were its satellite and phone network.
But in what could be the saddest blow of all, Western Union will ask its stockholders on Thursday to change the company’s name.
Western Union’s directors believe the once-proud moniker has acquired too many negative connotations due to the company’s financial troubles. Should the company file for bankruptcy - an all-too-real possibility - the name would be dragged through even more mud and could hurt its remaining operations, they say.
The company will continue to use the Western Union name for its services, but it wants to change the parent company’s name to New Valley Corp. It says the new name harkens back to its founding in 1851 as the New York and Mississippi Valley Printing Telegraph Co.
Back then, Western Union’s founders were among the first to see the potential of a telegraph network that would unite the dozens of small systems in operation at the time. During its first five years, it bought 11 other lines in Eastern states and joined them with a line running to Missouri.
In 1861, the renamed Western Union Telegraph Co. completed the first transcontinental telegraph. The innovation ended the need for the pony express - previously the only means of communication with the growing West.
Western Union became a ubiquitous presence before the spread of telephones. Its singing messengers and terse telegrams become fixtures in songs and movies. Its transmission network, which covered the nation like a spiderweb, also sent stories for news services and important documents for corporations.
But according to some experts, the seeds for Western Union’s decline were sown shortly after its founding: The young company was offered the chance to buy Alexander Graham Bell’s patents for the telephone, but turned them down.
″They said it was very frivolous. They said they would stay with telegrams,″ said industry analyst James McCabe.
He said Western Union also failed to capitalize on other opportunities to leverage its investments in its communications network.
″They had every opportunity to be successful,″ McCabe said. ″There’s so much pain in the history of Western Union.″
It’s not that the company didn’t try. It took advantage of new technologies to replace its wires with microwave and satellite links. It entered the long- distance phone business after AT&T lost its monopoly. It even helped develop the Airfone, the airplane-to-ground phone service.
But the company remained saddled by high costs that ate up too much income and a bureaucratic structure that stifled innovation. Both were promoted by years of government regulation of its operations, analysts said.
″They had a work force that was basically blue collar, with very strong labor unions,″ McCabe said. When improved communications technology reduced the need for maintenance work, ″their employees were really obsolete.″
Even after reducing its payroll drastically, Western Union remains burdened today by $25 million a year in pension and other obligations from its retired workers. Its retiree population is six times greater than its active work force of about 2,100.
Meanwhile, Western Union’s traditional businesses, the telegram and telex, declined in popularity.
To keep even, the company had to continually increase the prices of these services as the number of users dwindled, McCabe said. That drove away even more customers.
Western Union took a major step to ease its financial problems in December, when it sold its telex and electronic mail businesses to American Telephone & Telegraph Co. for $180 million. It used the proceeds, along with other funds, to buy back some of its junk bonds, lowering its interest payment burden.
But the bond repurchase did not end the troubles. Western Union still owes more money on its remaining debt - about $52 million a year in interest - than it takes in from its operations. It is fast running out of cash.
Western Union spokesman Warren Bechtel called the pension obligations and bond payments the company’s ″two cost clouds.″
The company said in government filings that unless things improve, it may have to file for bankruptcy by June 15, when it faces $42 million in bond payments.
To raise money, Western Union is trying to sell its priority-letter services, which include Mailgram, a type of telegram that is delivered to recipients the next day through the mail. These services are popular with businesses and others who use targeted mailings for advertising, bill collection and advocacy purposes.
In addition, the company says it will try to persuade its bond owners to renegotiate the securities to ease payment terms. Among its major bondholders are investor Carl Icahn, the owner of Trans World Airlines; and First Executive Corp., a life insurance holding company in financial trouble due to its junk-bond investments.
Western Union, now based in Upper Saddle River, N.J., has been controlled by investor Bennett LeBow since a 1987 restructuring. LeBow, who also controls computer maker MAI Systems Corp., is Western Union’s chairman. Bechtel said LeBow was not available for an interview for this article.
The company says its money-transfer business - which would be its only operation if it sells its priority letter services - remains healthy, despite the entrance of American Express Co. into the business four years ago. Analysts generally agree.
But unless it can reduce the burden of its debt and retiree benefits, Western Union’s future looks grim.