Mounting competitive pressures in its core consumer electronics business led Zenith to use its broad engineering and marketing expertise to diversify, as the company entered the original equipment manufacturer OEM components and cable television products businesses in the late s.
By the mids, Zenith Cable Products later known as Zenith Network Systems was a leading supplier of set-top boxes to the cable industry and a pioneer in cable modem technologies. The s saw this business evolve into a supplier of digital set-top boxes for wired and wireless networks. Zenith sold the Network Systems division in Zenith engineers co-developed the multichannel television sound MTS transmission system adopted by the industry for stereo TV broadcasts , and received an Emmy for pioneering work on development of MTS stereo TV.
Zenith digital-to-analog converter boxes supported the U. Zenith launched a major brand revitalization program in , updating its famous lightning bolt logo and creating a new marketing campaign designed to introduce the company and its products to a new generation of consumers. In , Zenith was recognized by Fortune Magazine as the top consumer electronics brand in customer satisfaction.
In , Zenith completed a broad financial and operational restructuring plan designed to return the company to financial health and leverage its brand, distribution and technology strengths.
Zenith and Goldstar executives said the deal would enable the U. S company to remain a strong player in a fiercely competitive television market. Zenith has lost money in nine of the past 10 years and shrunk to just 20, employees.
Zenith had fought for years to remain independent. Under former Chief Executive Jerry Pearlman, the company became a vocal proponent of tougher trade action against foreign imports--even as it moved much of its own production to Mexico. Zenith also made a major push to help revive the U. But it and the other U. Zenith, General Electric, RCA and other industry leaders of that time sold their wares all over the world.
Soon they were facing a tidal wave of black-and-white television exports from Japan, and that was followed in the s by a wave of color TVs that all but crushed them. The Japanese also overtook their American rivals in quality.
Motorola sold its television business to Matsushita in the early s. In , however, the government wanted to speed up the adoption process by having all seven company finalists cooperate on developing a digital HDTV system, forming the Grand Alliance. The following year, Zenith's transmission system was chosen by the alliance to be the U. With its HDTV payoff years away, Zenith faced a proxy fight in from a dissident stockholder dissatisfied with the management of the company. Pearlman was able to ward off this attempt for his ouster by wooing a foreign investor.
Zenith and Lucky-Goldstar LG had a relationship dating back to the s when the Korean firm began making radios for Zenith. Following the equity purchase, LG also gained access to Zenith's work on HDTV and on flat, high-resolution screens for computers and televisions. Starting in , Zenith attempted to improve operating results through a series of reengineering efforts initiated by the firm's president and chief operating officer, Albin F.
In addition to reducing its workforce by 25 percent over the next two years, the program aimed to improve new product development and get products to market faster, increase quality, and establish greater integration between factories. These efforts, however, did not produce immediate results, and continuing pressure from shareholders over the lack of improvement led the Zenith board of directors to begin closely monitoring Pearlman's performance through frequent and lengthy meetings and the tracking of numerous performance measures.
A further blow came in early when one of Zenith's creditors, the Bank of New York, found the company in violation of the net worth covenant in its credit agreement. Zenith's performance did improve in , but not enough to put it back in the black. Pearlman also announced that he would retire as chairman at the end of the year.
Shortly thereafter, Moschner and Pearlman revealed that the firm planned to concentrate on the production of large-screen TV sets, those with screens larger than 30 inches. This segment of the market was predicted to enjoy much greater revenue growth than the industry overall. LG Electronics Inc. The last of the American-controlled television manufacturers was thus in the hands of foreign ownership. Through the sale, Zenith acquired the immediate capital it needed for its plans to produce large-screen picture tubes and large-screen TV sets.
The deal was synergistic in that Zenith would also be able to make large-screen picture tubes for Goldstar TVs sold via LG's distribution system to such emerging markets as Latin America and Asia. The cash infusion and the potential for further LG investment in Zenith if the need arose placed Zenith in a stronger position to survive until it could benefit from its commitment to large-screen TVs and from its investment in HDTV.
But with the payoff from its high-end consumer electronics products still off on the horizon, and with sales and prices of television sets falling, Zenith continued to bleed red ink--at an accelerating pace.
Moschner resigned abruptly in July and was replaced by Peter S. Willmott, first as interim CEO and president and then on a permanent basis. In late Willmott announced the layoff of 25 percent of the company's U. It also began using a subbrand, Inteq, on its high-end products to differentiate them from lower-end models.
At the same time, Zenith continued to pursue cutting-edge products. In it joined with U. In August it canceled outright plans for the Woodridge large-screen picture tube plant.
Instead, it focused its capital expenditures on its existing picture tube plant in Melrose Park, Illinois. The following month, Willmott, after only ten months on the job, announced that he would retire earlier than expected, sometime during the following winter.
Following a successor search, Jeffrey P. Zenith began planning a more radical remake centering on its exit from manufacturing. In late Zenith closed its only remaining U. Then in August the company filed a prepackaged bankruptcy plan with the support of its creditors as well as LG. It emerged from bankruptcy in November of that year as a wholly owned subsidiary of LG, and as a company focused solely on designing, marketing, and distributing consumer electronics products. Of the company's remaining Mexican manufacturing plants, three were sold off and one was transferred to LG ownership.
Zenith began outsourcing all of its manufacturing, with most of the products built by LG itself. These moves left the company with a workforce of fewer than 7,, after having started the decade with 32, employees. After leading the company through its reorganization, Gannon resigned from his leadership position. This impressive range of projects and the company's improved financial performance during appeared to signal the beginning of a long-awaited Zenith turnaround.
Mexico ; Productos Magneticos de Chihuahua, S. Mexico ; Telson, S. Mexico ; Zenco de Chihuahua, S. Mexico ; Radio Componentes de Mexico, S. Principal Competitors: Emerson Radio Corp.
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