Paul A. Gorman

Paul Albert Gorman (December 16, 1907 – January 11, 1996) was an American business executive who held senior positions in the telecommunications, railroad, and paper industries. He was president of Western Electric from January 1964 through November 1969, succeeding H. I. Romnes and preceding Harvey G. Mehlhouse.

After leaving Western Electric, Gorman became president of the financially troubled Penn Central Transportation Company. He served as its president from December 1, 1969, until August 11, 1970, and additionally as chairman and chief executive officer from June 9 until his resignation. His tenure encompassed Penn Central's June 1970 bankruptcy, then the largest corporate bankruptcy in United States history. He later headed International Paper, where he directed a restructuring program from 1971 through 1973.

Early life and education

Gorman was born in Carrollton, Missouri, on December 16, 1907. He grew up in Carrollton and attended Carrollton High School. As a boy and teenager, he held several jobs, including sweeping floors in local stores, delivering newspapers, and working for a furniture and undertaking establishment and a frozen-food business.

Gorman studied business at the University of Missouri. To meet his expenses, he fired a furnace, waited tables, and worked nights at a campus drugstore. He was a member of the professional business fraternity Delta Sigma Pi. He received a Bachelor of Science in business administration in 1929.

While at Missouri, Gorman met Betty Edwards of St. Louis, whom he later married.

Bell System career

Early Western Electric career

Gorman joined Western Electric in 1929, beginning as an accounting clerk at the company's Hawthorne Works near Chicago. According to a later university profile, he was offered the position after nearly leaving his employment interview to avoid being late for his evening job at the campus drugstore.

During the following two decades, Gorman advanced through financial, manufacturing, distribution, and personnel assignments. His positions included assistant engineer of manufacture, central-zone distributing manager, and personnel director.

In 1953, he transferred to the parent American Telephone and Telegraph Company as assistant vice president for personnel relations. He returned to Western Electric on October 1, 1954, as vice president for defense projects, a newly created position responsible for coordinating the company's expanding management and supervision of United States government defense programs.

Western Electric's defense responsibilities included its oversight of Sandia Corporation and work on continental air-defense and missile systems. Contemporary Sandia publications identify Gorman as a Western Electric officer and member of the Sandia board.

In 1956, Gorman became vice president for finance. Later that year, when Arthur B. Goetze was elected president of Western Electric, Gorman succeeded Goetze as vice president in charge of manufacturing. His manufacturing responsibilities included Western Electric's network of plants and its production of telephone apparatus, switching equipment, cable, electronic components, and military systems. He also served as a director of the Western Electric subsidiary Teletype Corporation.

New Jersey Bell and AT&T

Gorman left Western Electric's manufacturing vice presidency in early 1958 to become vice president for operations of New Jersey Bell. Paul R. Brousse succeeded him as Western Electric's manufacturing vice president. Gorman was subsequently elected president of New Jersey Bell during 1958.

On March 18, 1959, AT&T's directors elected him an executive vice president, effective April 1. He succeeded Clifton W. Phalen, who had become president of the New York Telephone Company.

At AT&T, Gorman was concerned with management, personnel, operations, and cost control across the Bell System. A 1959 profile described his management philosophy as emphasizing broad experience, informed judgment, and accepting responsibility for decisions.

President of Western Electric

Gorman became president of Western Electric on January 1, 1964, succeeding H. I. Romnes, who had been promoted within AT&T. Gorman served through November 1969 and was succeeded in December by Harvey G. Mehlhouse.

His presidency coincided with the Bell System's transition from electromechanical to electronic switching. In 1965, Western Electric more than doubled production of electronic switching equipment and manufactured over nine million telephone sets, including nearly one million Touch-Tone sets and more than 400,000 Trimline telephones. Company employment reached approximately 168,800, and annual sales reached about $3.3 billion.

Gorman stressed manufacturing productivity and cost reduction. Western Electric reported that during 1965 it reduced prices charged to Bell operating companies by an annualized $33 million and recorded approximately $49 million in savings on government work, most of it connected with the Nike-X missile-defense program. He argued that manufacturing economies should be passed through the Bell System in lower equipment prices, thereby limiting the capital requirements and service costs of local telephone companies.

During his presidency, Western Electric expanded training in management and manufacturing technology. In 1969, the company opened a $5 million corporate education center intended to provide advanced training for managers and technical personnel.

Gorman also represented Western Electric in public discussions of corporate responsibility. On February 10, 1967, he delivered an address, "The Business of Business," to the Cicero Manufacturers Association in Illinois. In April 1968, he participated in a Princeton University debate titled "Ideals and Profits—Can They Mix?," opposite student representatives including members of Students for a Democratic Society.

In 1969, the centennial year of Western Electric, Gorman gave a Newcomen Society address on the company's history. It was published as Century One ... A Prologue.

Penn Central

Appointment as president

In September 1969, Penn Central's board selected Gorman to replace railroad executive Alfred E. Perlman as president. The appointment was publicly announced on September 23, and Gorman assumed office on December 1. Perlman became vice chairman, while Stuart T. Saunders remained chairman and chief executive officer.

Gorman was recruited primarily for his reputation in corporate administration and cost control rather than for railroad operating experience. Saunders described him as an executive capable of bringing additional discipline to Penn Central's cost-control and management-efficiency programs. He received a salary of $250,000 a year.

Penn Central had been created in 1968 by the merger of the Pennsylvania Railroad and New York Central Railroad and had subsequently absorbed the insolvent New York, New Haven and Hartford Railroad. By the time Gorman arrived, the company was experiencing severe operating losses, problems integrating the predecessor railroads' computer and accounting systems, and increasing difficulty obtaining short-term credit.

Chairmanship and bankruptcy

As the cash crisis worsened in the first half of 1970, Penn Central sought government assistance and attempted to arrange a federally guaranteed loan. On June 8, the board accepted the resignations of Saunders and several other senior executives. Gorman became chairman and chief executive officer on June 9 while retaining the presidency.

Gorman's promotion occurred only days before the company exhausted its remaining sources of private credit. Penn Central Transportation Company petitioned for reorganization under Section 77 of the Bankruptcy Act on June 21, 1970. In a letter to employees following the filing, Gorman asked them to remain at work and continue providing service while the railroad operated under court supervision.

Congressional investigations later concluded that Penn Central's collapse had developed over a period substantially predating Gorman's presidency. Investigators found that serious operating losses, inadequate financial controls, misleading accounting, and undisclosed problems in non-rail subsidiaries had left senior management and creditors without a reliable picture of the company's finances. The report noted that even Gorman, after being assigned to investigate losses in the Executive Jet Aviation subsidiary, did not initially discover their full extent.

Gorman resigned as president, chairman, and chief executive officer of both the Penn Central Company and its transportation subsidiary on August 11, 1970. William H. Moore was selected as president and chief executive officer later that month and took office September 1.

International Paper

In 1971, Gorman became chairman, president, and chief executive officer of International Paper. He was recruited after a sharp decline in earnings and an increase in long-term debt associated with the company's expansion and diversification.

Gorman initiated a restructuring program intended to improve profitability and concentrate resources on viable operations. The company established a reserve of approximately $78 million for plant and asset write-offs, closed or sold inefficient facilities, disposed of several noncore businesses, and reorganized its international operations along product lines. Facilities affected included a specialty-paper mill at York Haven, Pennsylvania, and operations in Ecuador, Italy, Puerto Rico, and West Germany.

International Paper reported that although its 1971 earnings were the lowest in a decade, earnings increased by approximately 30 percent during the first half of 1972. At the 1972 annual meeting, Gorman said that the company's packaging operations were improving.

Gorman also addressed environmental and resource-policy questions affecting the paper industry. In 1971, the Congressional Record identified him as president and chairman of International Paper in discussion of environmental and industrial policy. J. Stanford Smith joined International Paper as vice chairman in 1973 and succeeded Gorman as chairman and chief executive officer on January 1, 1974. Gorman remained associated with the company for a time as a director and chairman emeritus.

Other activities and honors

Gorman served on corporate, educational, and civic boards during his business career. His directorships included Teletype Corporation, Sandia Corporation, and other organizations associated with the Bell System. He also participated in business and educational organizations concerned with management training and higher education.

In 1960, Delta Sigma Pi named Gorman its "Deltasig of the Year", recognizing his professional achievement while he was an AT&T executive vice president.

A Western Electric management conference informally named a humorous "Paul Albert Award" after him. A 1967 Sandia publication recorded its presentation to Sandia president John Hornbeck in recognition of the development of the Rolamite mechanism.

Personal life and death

Gorman's first wife was Betty Edwards, whom he met while attending the University of Missouri. He later married Althea Dilworth Robinson Richards, a civic volunteer and former hospital board member.

After retirement, Gorman lived in Delray Beach, Florida. He died on January 11, 1996, after suffering injuries in a fall at his home. He was 88.

Selected publications and addresses

• Gorman, Paul A. "Integrity Derives from People". Address to the Western Electric Pioneer General Assembly, September 29, 1965.
• Gorman, Paul A. The Business of Business. Address to the Cicero Manufacturers Association, February 10, 1967.
• Gorman, Paul A. Century One ... A Prologue: Western Electric Company. New York: Newcomen Society in North America, 1969.

External links

• “The Rapid Rise of Paul A. Gorman” at the University of Missouri