In 1963 GE put a new word into its corporate lexicon. That word was turnkey. In a turnkey project, a contractor takes on full responsibility for designing, planning and building a project. The customer is promised full operation by a fixed date. Just turn the metaphorical key and start it up. (523)
GE especially applied that turnkey concept to nuclear power plants. More generally, however, that 1963 turnkey nuclear power plant program symbolized GE's 1960s impatience. It was impatient to see its three big gambles — aircraft engines, computers, and nuclear reactors — complete the trip from progress to profitability. To help complete that trip GE had, in the years 1945-1960, remodeled itself. The signature programs of that remodeling had been Boulwarism in labor relations and decentralization in corporate structure.
The questions this chapter addresses are: how well would GE perform in the 1960s at completing its three key progress-to-profits transitions? How would the company's key post-war changes, Boulwarism and decentralization, perform in the 1960s? What light did this cast on the general evaluation of the benefits and evils of corporate giant size?
On that progress to profits transition, Aircraft Engines had gotten the earliest start. By the 1960s, within GE, it was a company within a company. GE had spent the 1950s remaking itself into a decentralized company of moderate sized departments with single purpose, preferably non-union, factories in small cities or towns. Aircraft Engines had gone the other way, toward a recentralized business, located mainly in two big unionized works on the edge of two big cities, Boston, MA and Cincinnati, OH. (524)
By 1960, all aircraft engine makers were converging on an old idea. This was the turbofan. It at last combined the power of the turbojet with the efficiency of the turboprop. The idea had been suggested back in the 1930s. In the next 30 years it was brought along by an international cast. The basic idea was to enclose a turbojet within an open ended cylinder. Use that turbojet's turbine to turn not only the turbojet compressor, but also a fan, also enclosed within the cylinder. The fan acts as a propellor, adding a second means of propulsion. The payoff was achieving three desired properties: the 500-600 mph speed range now expected of commercial airliners, high efficiency, and less noise. Looking forward, engineering issues remained. For example, should the fan be put in front of the compressor near the engine inlet, or in back of the turbine, near the jet output? What should be the "bypass ratio" — the ratio of the amount of cooler air propelled by the fan to the amount of hotter air blasted out as a jet?
GE developed its version of the turbofan by following its usual tactic of starting with a Defense Department task. In 1962, this was a $500 million Air Force contract for powering a gigantic new cargo plane, the Lockheed C-5. GE got the contract based on design choices putting the fan behind the turbojet core, and choosing a relatively high bypass ratio of 8:1. GE would build 464 of those engines by the end of the contract in 1971. Could that engine be further adapted to the much more profitable civilian market? Sales there potentially ran into the thousands of engines, with much larger profit margins. A big target was the next model from the now dominant airframe maker Boeing, the 747.
Rival Pratt & Whitney had made different engine choices: putting the fan in front of the turbojet core, and using a bypass ratio of about 5:1. Boeing preferred Pratt & Whitney's engine over GE's. In the airline industry, however, it is the airline, not the airframe maker, that selects the engine. What happened next is disputed. GE's official history describes it as withdrawing from the contest in deference to Boeing's preference. Joe Sutter, a leading engineer on Boeing's 747 project describes it differently. He says GE tried to sell its engine to a key airline customer, Pan Am, by means of pressure exerted by a GE Board of Directors member who was also on the Pan Am Board. Sutter claims he had to put his reputation on the line to keep Pan Am from making what he believed was a technical mistake. (525)
Whatever the details, by 1967 GE had lost out to Pratt & Whitney on the 747. It was once again on the outside looking in. It would get a big contract for the engine on the proposed supersonic transport (SST). Long before that SST could take to the air, however, a 1971 Senate vote would cancel the program. In 1967 GE faced a decision. Should it retreat to its successful military and business jet engines while betting on an SST leapfrog? Or should take another shot at the subsonic commercial airliner market? The choice was to take another shot. Gerhard Neumann led a new effort that further adapted the GE turbofan. This time GE adopted the Pratt and Whitney choices of a front fan and a more moderate bypass ratio.
This new engine, the GE C5A, did not immediately go on the Boeing 747. Instead, GE executed a pair of flanking movements. Domestically, the C5A engine initially powered Boeing's U.S. rival, the McDonnell-Douglas DC 10. Meanwhile, in a global flanking move, GE joined a joint venture that had originated as a European challenge to U.S. aviation supremacy. This became the airframe company Airbus and the aircraft engine venture Snecma. By 1970 no one yet knew whether these moves would pay off. GE Aircraft Engines and British rival Rolls Royce still lagged far behind the leader, Pratt & Whitney, in much the same way that, in the electric power industry, Westinghouse and Allis Chalmers still lagged far behind GE. It would not be in the 1960s, but in the 1970s, that GE would find out if it could make money selling turbofan engines to the airlines.
Meanwhile, the electric power industry would recover in the 1960s from its troubles of the 1950s. The boom and bust nature of utility ordering worked this time to the benefit of the manufacturers. The big electric event of the 1960s was the massive 1965 Northeast U.S. blackout. The event led to a recognition that the low level of turbine-generator orders in the 1950s had reduced utility generation reserves to a dangerously low level. In Schenectady, a manager had anticipated the emerging opportunity. Don Craig was a South Dakota native and a 1932 engineering graduate of that state's university. In the early 1950s, after nearly two decades with GE, he joined that first generation of decentralized department managers, running a turbine parts plant in Somersworth, NH.
There his most memorable lesson did not come from Crotonville or the Cordiner-Smiddy Blue Books. It came from a business consultant who was guiding the move of New England textile mills to the South. I can always show them there is a 30% saving from moving a plant south, the consultant told Craig. What I don't tell them, he added, is that with good management, they could get just as big savings here in the North. "That made me think," Craig would later recall. "If you could get everybody involved in this — the community, labor leaders and GE — you could get it done." (526)
In 1962 he got a chance to get it done on that bigger stage. He became Vice President and General Manager of GE's Turbine-Generator Division at Schenectady. It was the largest division in the company. It was also one of the most troubled. Its problems went beyond resistance to decentralization and price fixing. GE's long undisputed reign over the U.S. electrical equipment market was under challenge from overseas.
The European electrical manufacturers had historically technically equalled, and sometimes surpassed, GE. They had, however been kept out of the U.S. market. This was first done by tariffs, then by agreements, then by the depression, and then by the war and its devastation. By the 1950s they were recovering. At first their challenge in the U.S. market was small. In some areas, however, such as hydroelectric generators, it soon became significant. This was followed by a wake up call: the 1960 ordering by the TVA of coal-fired turbine generators from the C. A. Parsons Co. of Great Britain. GE lobbyists scurried to Washington to seek more tariff protection. At Schenectady, however, everyone knew that the problem was closer to home. GE's costs were out of control. Many causes contributed. For example, complacency had led to a failure to update procedures or install improved machinery. The focus, however, soon centered on labor costs. Piecework, an old effort to improve productivity, was backfiring.
As mentioned, piecework had begun as a way to reduce manufacturing costs while increasing worker pay. Combining those two goals required more disciplined managerial attention to rate-setting than the Schenectady management was willing to exert. As the company failed to keep rate setting focused on productivity goals, the skilled pieceworkers learned to beat the system. They took advantage of loopholes, such as claiming extra credit on maintenance activities such as sharpening tools. The result was much higher pay without the full expected payoff in improved productivity.
Pieceworkers were about 3000 of Schenectady's 10,000 shop workers. They were earning up to twice as much per year as the day workers — another split among the labor "us". This time, however, the split worked to the detriment of the managerial "them." A. C. Stevens, the last Works Manager, saw the Schenectady problems as many sided: "the manager who refuses to take the risks … the engineer who rests on his laurels … the shop man who refuses to accept the fact that he must adapt to changing realities on his job".
It all culminated, Stevens concluded
in the eternal debate over what the piecework allowance shall be for each job and the dissension which this continually generates. It is not surprising that the system has lost most of its value as a true incentive. (527)
Don Craig spent most of his first two years in Schenectady studying the problem. In l963, in the waning days of the Cordiner regime, he had a proposal ready to take down to the Advisory Committee at GE headquarters in New York City. It boiled down to a bargain. In exchange for union acceptance of the end of that lucrative piecework program, GE would put a $25 million investment into Schenectady, ending the decline of the work force number. That decline had already gone from 40,000 in 1950 to 20,000 in 1964, and seemed headed toward 15,000." Quite likely we will have to take a strike", Craig concluded. "But it is still a good idea." (528)
Craig's presentation was met with silence. He was about to protest the lack of enthusiasm when Vice President Chuck Rieger chimed in. "Don," Rieger said, "That was an enthusiastic reception!" As little as the Advisory Committee cared for Schenectady, they cared even less for missing the boom in utility and industrial orders about to begin as the U.S. economy improved and utility capacity shortfalls became evident.
Craig announced the Make Schenectady Competitive Program on April 13, 1964. Five months of intense confrontation followed. GE took some unilateral actions. For example, In July, 1964, without union approval, it converted all piecework jobs to daywork.
The confrontation was, however, bargaining, not Boulwarism. "They listened," Craig recalls of his conversations with the the union leaders. "They realized it had to happen." GE also listened. It sweetened its offer of investment in Schenectady to $60 million. It agreed to phase out piecework gradually, and replace it with a hybrid system called day work with measurements.
These changes emerged slowly over five months of intense negotiation. From the company side came a barrage of publicity. Craig, the good cop, held coffee klatches for local clergymen, and made so many TV appearances that, he said, "my kids started calling me the poor man's Lawrence Welk." (529)
Unlike in 1946, few Schenectady citizens came out publicly for the union. The Schenectady Chamber of Commerce and Industrial Development Agency came out, unsurprisingly, for GE. All this happened in a slightly overgrown small town where, for example, the son of the manager in the GE motor department was dating the daughter of the union bargaining agent. Meanwhile GE's bad cop, negotiator H. N. Parker, was going head to head with Jandreau. Bluffing accompanied the bargaining. GE let it leak that it was making a study of the feasibility and cost of moving Schenectady turbine operations to "location X" in the South. The union launched court rulings alleging that GE's actions violated the national contract. The national union explored a national strike in sympathy with Schenectady. Neither side followed through. Likely, neither ever intended to.
The impasse dragged on right up to a Sept 30, 1964 deadline, and then a little bit beyond. In the end, Leo Jandreau, a life long Schenectadian as well as a union leader, acted in the balanced best interest of city and union. At 1 AM on September 31 1964, he and Don Craig announced an agreement that he labeled "an honorable settlement" and Craig called "a victory for everyone." Later, and privately, Craig would add: "if we had a weak union leader instead of Leo we would never have pulled it off. He had the credibility."
It was Jandreau's last act before retiring as IUE 301 bargaining agent. Piecework would disappear but only gradually, tied to seniority. It would be replaced by that day work with measurements system. The company would measure worker performance but would pay all workers a contracted fixed wage varying with skill requirements.
Jandreau left behind a Works and a union local that were making a significant turn upward for the last time. Employment at the Schenectady Works rose from 20,000 in 1964 to 27,000 in 1970. This included 12,000 union members. In 1968 GE had its biggest year so far in turbine manufacturing, shipping 12.2 GW of capacity.
Though becoming more productive, Schenectady remained contentious. Discontent over the pace and details of ending piecework led to walkouts, wildcat strikes, and, in 1966, the long strike that Don Craig had earlier warned about. It lasted 11 weeks. It ended on GE's terms, against the wishes of the union's new bargaining agent John Shambo, by the narrow vote margin of 4475 to 4355. (530)
At the end of those contentious 1960s, Don Craig predicted for 1971 a "reasonably good year" for Schenectady, but added a "warning against complacency." He noted that "demand for our products still is beyond the capacity of our facilities," and that the reliability and efficiency of GE turbines had earned orders in competition with competitors who offered 35% lower prices. On the other hand, Japan's Hitachi was willing to go to a price 40% below GE's to earn another big U.S. order. (531)
Meanwhile, in labor relations, some of the earlier contention settled down. Joining Leo Jandreau and Schenectady piecework in 1960s retirement was Boulwarism. (Lemuel himself had retired in the 1950s, but continued to consult). In 1964, the National Labor Relations Board declared Boulwarism a violation of the Wagner Act and ordered its discontinuation. (532)
Whether GE acted in accord with this decree was disputed. A New York Times editorial described the subsequent late 1960s union-company clash as "a sense on both the management and union side that they are warriors in an economic holy war over Boulwarism." (533)
As one result, in 1969 a historic reunion occurred. The smaller, once communist, and still feisty UE, and the larger, originally anti-communist, more conservative IUE, agreed to bargain jointly. The bargaining sputtered out in October, 1969. That led to a nation wide 102-day strike by 150,000 union members. It was the last big company-wide strike of the Old GE. It won a 50¢ per hour wage increase, resumption of an earlier discontinued cost of living allowance, and a couple dozen other contract modifications.
So by 1970 GE was faced with a National Labor Relations Board edict that had outlawed Boulwarism, and a unionized labor force that was united to a degree not seen since 1950. GE top management dismissed the NLRB rebuke of Boulwarism as a political result, arrived at by the appointees of the Democratic Party, the party of organized labor.
GE top management also participated strongly in new efforts to assert Giant Corporation public influence. A 1971 memo to the U.S. Chamber of Commerce by a prominent lawyer and soon to be Supreme Court Justice Lewis Powell had warned that U.S. capitalism was in grave danger due to attacks not only from left wing political groups, but from such consumer advocates as Ralph Nader. To respond effectively, Giant Corporations needed to unify in both pro capitalist public relations campaigns and political advocacy.
Part of the Giant Corporation response to the Powell Memo was the founding in 1972, led by by CEOs Fred Borch of GE and John Harper of Alcoa, of the Business Roundtable. It has been described as a sort of Senate of Giant Corporations. Members, all of them CEOs, agreed to vote among themselves on key political issues, then unite behind the side that won. A prime example was a 1970s political initiative of the Democratic Party, the Labor Law Reform Act. It proposed pro-union actions such as repeal of right-to-work provisions of the Taft-Hartley Act. GE was not initally opposed to the Labor Law Reform Act, being already union organized. When the Business Roundtable's vote went against that Act, however, GE joined with the majority and lobbied against it. That Business Roundtable lobbying by played an important role in the Labor Law Reform Act's narrow defeat in 1976.
GE and other Roundtable members also embraced the Political Action Committee (PAC), a way of getting more money into politics. The PAC had been invented in the 1940s by the labor unions. After 1960, it became a capitalist tool. Meanwhile, the spirit of Boulwarism was being injected into the Republican Party by a protege of Lemuel himself, California's new governor Ronald Reagan. (534)
The role of this increased Giant Corporation political effort on the long term decline of unionism in the U.S. is controversial. It happened alongside other influences ranging from globalization to the information revolution. Whatever the detailed causation was, from the 1970s on there was a steady decline of union power in GE. At Schenectady, for example, that 1970 union membership of 12,000 fell by the early 21st century to 600. (535)
Unionism's last stand in GE mainly impacted its older businesses such as turbines, generators and motors, and its old works, such as Schenectady, Erie, PA, Lynn, MA, and Ft. Wayne, IN. Meanwhile, GE was seeking, in newer and less unionized locations from Syracuse, NY to Phoenix, AZ, to gain leadership in the array of newer businesses based on electronics.
The electronics targets ranged from transistors to computers. Most competitors focused on just one segment of this broad exponentially growing electronics marketplace. Examples were Texas Instruments in components, Philco in televisions, TRW in aerospace,and IBM in computers. GE and RCA stood out in their efforts to span the entire range of the new electronics. GE was alone in seeking to achieve this broad electronics span while simultaneously mastering other big technology-business challenges such as jet engines and nuclear reactors.
Was such a stretch possible? Some prominent thinkers said yes. Harvard economists Joseph Schumpeter and John Kenneth Galbraith argued that the synergy provided by giant companies' large professionalized "technostructures" enabled them to dominate not only current manufacturing but also future innovation. To MIT business historian Alfred Chandler, the giants' key advantage was the replacement of the market by the visible hand of top management. In the 1960s GE would provide a test case of this predicted continuation of giant corporation dominance.
In electronics, GE seemed in the 1960s to have both synergy and strategy. The synergy combined a world class Research Lab near Schenectady to explore the frontiers of science with an Electronics Park in Syracuse to follow through on the technology. Then business departments would embody that technology in products.
The strategy element was provided by a new top management that in 1963 succeeded the Cordiner team. The new CEO, Brooklyn-born Fred Borch, had graduated from Case Tech, and spent his career in marketing for GE's consumer businesses. His mantra became "scientific salesmanship."
As president, he endorsed decentralization, but thought it had gone too far. GE's diversity now lacked an overall strategic vision. To provide one, he beefed up the corporate strategy staff under the leadership of a former marketing subordinate, John McKittrick.
In 1965 that staff assembled a Growth Council, including both inside and outside experts, to recommend targets for the expansion of GE. The Council endorsed the three already identified big gambles: commercial jet engines, computers and nuclear. It further recommended that the company diversify even more widely. Top recommended targets beyond the existing businesses were home entertainment, planned communities, and education systems.
The Growth Council also criticized recent management practices:
GE's lagging growth was connected with and related to its drastic decentralization program, which, by hindsight, must be judged an administrative success and an entrepreneurial failure. (536)
For the immediate future, however, the key was not entrepreneurship. It was how well GE would perform in the growth areas to which it was already committed: nuclear, aircraft engines, electronics and computers.
In electronics components, GE's Syracuse NY Electronics Park was by 1960 a major maker of transistors, the solid state components that were rapidly replacing vacuum tubes. Supporting this solid state transition, the GE Research Lab had built up a strong team of solid state physicists. Some of them, such as LeRoy Apker, Robert Hall and Jerome Tiemann, were also significant inventors.
In television, GE was making up for its late start in color. It continued its emphasis on small sets. It decentralized its production to remote factories that were non union and thus presumably more productive. In the 1960s Japanese competition was still a small cloud on the horizon. For GE a solid #2 position behind RCA seemed within reach.
In the early 1960s computer business, IBM domination was unchallenged. Competitors were derisively dismissed as "the Seven Dwarfs." GE realistically set as its ambition to become, as a GE pioneer would later title his memoirs, King of the Seven Dwarfs.
This was not a defeatist aspiration, but a sensible and potentially profitable one. After all, GE had learned in businesses ranging from steam turbines to nuclear submarines to aircraft engines that customers want a second source — if only to curb the arrogance and potential profiteering of #1. Moreover, with the antitrust laws in force, a prudent #1 had, at least in the past, kept its #s 2 and 3 healthy, even to the extent of fixing prices with them.
In the mid 1960s there were actually nine dwarves. Far from being their king, GE was in the middle of the pack. Its roughly $40 million in 1963 computer-related sales was not just dwarfed by IBM's $1.2 billion. It was also well behind the $75-$150 million range of Sperry Rand, Control Data and Philco. (537)
Aiming to achieve that #2 position, GE continued its dual effort of both providing alternatives to, and attempting to outmaneuver, IBM. As a global flanking maneuver, it bought controlling shares in two European computer companies, France's Bull and Italy's Olivetti. Meanwhile, in the U.S. it followed fast on a development that appeared by 1965 about to revolutionize the way computers were used.
This was time sharing. In 1960, computer programmers still punched their programs onto stiff paper cards, following the instruction "do not fold, spindle or mutilate". The decks of cards then ran through the computer. It was typical to drop off your program one day, and not get results until the next.
By the early 1960s, increased computer power offered an option. A single computer could be hooked up to a dozen or more typewriter-like terminals. The computer could divide its processing among those users. The speed of the newest computers allowed each user to feel he had personal use of his own computer. (538)
GE had in 1961 already carried out a related idea. Under a Defense Department contract it had time shared computer power among many test instruments at Wernher Von Braun's Huntsville, AL rocket facility. In 1962, GE built on that capability to bid on an educational time sharing project. It was funded by federal government's National Science Foundation, and led by Dartmouth College math professor John Kemeny. The obvious first choice, IBM, asked too high a price. This left a competition with NCR and Bendix that GE won. The Kemeny initiative was a computer milestone. It did not just introduce time sharing to academia. It also, via its new simplified and understandable programming language BASIC, vastly widened the community of potential computer users.
The next step was to expand time sharing to full professional and business use. Develop the required more powerful computer operating systems and languages. Set up time sharing centers across the country. Condemn IBM's card chomping dinosaurs to extinction. In pursuit of this goal in 1964, GE entered a joint venture with MIT and Bell Labs. MIT had initiated the effort with its advanced time sharing system, Project MAC. GE would adapt its newest and most powerful computer to time sharing. The three parties would jointly develop the needed operating system, called MULTICS.
So Fred Borch's strategists might well see GE's mid-1960s electronics prospects as bright. Component leadership would flow from GE's world class combination of Schenectady Research Laboratory and Syracuse Electronics Park. In the early 1960s both locations were bigger names in the electronics world than the infant California upstart not yet widely known as Silicon Valley.
With cost reduction and superior components, television could become a reliable cash cow. With superior components and its access to corporate cash, GE computers could both provide a solid second source to IBM, and also hit IBM where it wasn't — on the new frontier of time sharing.
It was a great strategy in theory. Practice proved another matter. In components, new processing methods revived an old idea. It was to produce transistors not just one at a time, but many at a time, all embedded in the electronic circuit that used them. Contrary to the expectation of Schumpeter, Galbraith, and Chandler, this insight was not reduced to practice by the technostructure of a Giant Corporation. It was done at two smaller more nimble companies focused on electronics. At Texas Instruments, Jack Kilby invented one version of the integrated circuit. At Fairchild Semiconductor, Robert Noyce invented another.
Their inventions opened a great opportunity for a fast follower. Why wasn't GE the one to achieve this fast following? Bob Hall, GE's most prominent electronics physicist and inventor, later gave an answer. At Electronics Park in Syracuse, he said, the engineers thought of integrated circuits as a research topic, and waited for the GE Research Lab to take the initiative. At the Research Lab, Hall said, integrated circuits were regarded as a manufacturing improvement and therefore the business of Electronic Park. At this point Hall paused, then added "damn important manufacturing improvement though!" In a later Oral History he added that corporate management
could see a lot of competition coming from people like Texas Instruments and Raytheon, RCA, Fairchild out in California. Integrated circuits were coming on in a big way, and GE did not have a very strong position. Rather than pour a lot of money into electronics, I think they decided it was better to purchase these electronic transistors and circuits and so on, and not try to compete in semiconductor work. (539)
Hall's later verdict echoed the one presented in 1968 by GE Research Director Arthur Bueche. "Somewhere, somehow," he said,
our leadership in solid state electronics has dis-integrated… in the old electronics revolution of [discrete component] solid state we did pretty well. But in the 'new [integrated circuit] electronics' we were, lets face it, for a long time simply asleep at the switch. (540)
Moving up from components to consumer products, GE's never caught up to RCA in color TV. The black and white and small set businesses proved only moderately profitable. First domestic competition kept prices down. Then foreign competition began the process of finishing off the U.S. television industry.
In computers a dominant competitor, IBM, loomed from the start. GE's computer business tried following, but sometimes too fast. For, example, in 1967 too rapid introduction of one computer model, the GE 600, led to an expensive and embarrassing return of the machine by a major customer, Martin Marietta. Forbes magazine would subsequently label computers as "GE's Edsel". Less attention was later paid to the subsequent fixing of the problems and the emergence of the GE 600 series as a reliable and cost effective machine. The GE flanking movements also did not go as planned. Attempts to merge the GE line with those of Bull and Olivetti proved what GE pioneer Oldfield labeled a "costly diversion." (541)
In time sharing, things initially looked brighter. By 1968, at Dartmouth, a GE computer was serving 200 users simultaneously. GE Research and Bell Labs seemed to be making good progress on the MULTICS operating system needed to make commercial time sharing systems practical. GE had plans for dozens of time sharing centers nationwide.
In 1969, these efforts hit a snag. MULTICS proved difficult to develop. Bell Labs dropped out. (Two Bell computer scientists would develop a simplified version called UNIX. It would prove to be by far the most valuable outcome of the MULTICS effort).
As the giants stumbled, smaller start-ups pioneered a different route to broader computer use. The Digital Equipment Company and others pioneered minicomputers. They were relatively small (initially refrigerator sized rather than room sized) and relatively cheap (tens of thousands rather than hundreds of thousands of dollars). The arrival of integrated circuits gave these economical machines unexpectedly great computing power. Suddenly a subscription to a time sharing utility looked like a bad bargain. It became a 1970s sideshow, not the originally expected future of computing.
In 1969 GE faced a big decision. Should it pour the hundreds of millions of more dollars needed to compete for that King of the Dwarfs crown? The company's losses due to that winter's long strike made such an investment appear even less attractive. The issue was assigned to a team called the Venture Task force and nicknamed "the Three Wise Men". It was made up of strategist John McKittrick, Corporate Counsel Bob Estes, and Vice President of Finance Reg Jones. None was a computer expert. At their recommendation, the GE computer business was in 1970 sold to Honeywell. (542)
Why had GE not been more successful in computers? Barney Oldfield, first Manager of the GE Computer Department, blamed "micromanagement from corporate headquarters." A non-GE veteran of the computer industry agreed:
GE had a major problem with the top management of its computer operation. In those days, GE corporate doctrine was that any competent manager could run anything. Management of the computer division turned over so fast that the engineers could do anything they pleased. Before the [computer] top brass grasped binary arithmetic they were back in upstate New York building turbines. (543)
Another GE computer pioneer, George Snively, had a different story. He denied that GE's computer business was a failure. He argued that accounting for foregone leasing income and other potential earnings, GE Computer was heading for profitability when the plug was pulled. Honeywell got a decade of profits out of the GE effort. GE itself kept its time sharing effort, and for decades afterwards, GE Information Services was a successful business. (544)
Despite such revisionism, the consensus view held that GE's performance across that electronics spectrum was dismal. There were bright spots, such as ERMA, and providing computer power to the Dartmouth time sharing initiative. In total, however, GE's electronics experience provided evidence against the Schumpeter-Galbraith-Chandler theory of continuing giant corporation dominance. Scope, scale, strategy, structure and the visible hand did not enable this particular giant to dominate the electronics future as it had dominated the electric past.
GE could jettison computers in 1970 without losing too much face. Not so nuclear power. Ralph Cordiner put it this way in his 1959 Time cover story. "the atom is the power of the future, and power is the business of General Electric." (545)
In 1963, GE's new CEO Fred Borch decided that it was time to make nuclear reactors profitable. This was not a response to customer demand. The electric utility companies were content in 1963 with coal as a fuel. The three U.S. civilian nuclear power plants operating before 1960 were not utility initiatives, but were all demonstration plants, built with large government subsidy.
In 1960, at Dresden, IL, GE and Commonwealth Edison successfully put into operation the first commercial GE BWR. That success did not, however send customers clamoring with orders to GE's door. This was disappointing. More alarming, in 1962, were moves by Westinghouse. It sold a 550 MW nuclear plant to the New England Yankee Power Company, a joint venture of 12 New England utilities, and a 390 MW plant to Southern Calfornia Edison. By participating in an AEC program to speed up the adoption of nuclear, Westinghouse got the government to pay 10% of cost.
GE's response was to do Westinghouse one better. It offered turnkey nuclear plants. Previously, an electric utility that went nuclear managed by itself the efforts of multiple vendors. The utility contracted with equipment manufacturers to supply the turbine, generator and boiler. That utility also contracted separately with a firm of architect-engineers to have the power plant built. To simplify matters for a utility willing to go nuclear, GE offered that turnkey option. For a fixed cost, GE would do everything. As a manufacturer it would supply all the equipment. As architect-engineer, GE would build the plant. All the utility had to do was turn the key to start it up. As George Stathakis, Marketing Manager for the GE Atomic Power Equipment Department, explained, the turnkey alternative
responds to the expressed desire of some utility company purchasers who desire to place the main construction and financial responsibility with a single organization because of the comparatively new technology involved.
GE offered all this at an attractively low price. For a 300 MW nuclear plant, the price was $45.6 million. For a 1000 MW plant, the price was $103 million. This meant that tripling the capacity would only double the cost. The 300 MW plant would, GE said, produce electricity for .52¢ per kwhr, the 1000 MW plant for only .38¢ per kwhr. (546)
Those predicted figures were based on two principles. The first was economies of scale. Bigger machines should produce output at lower unit costs. This was familiar from the turbine generator business. GE's first turbine generator had been rated at 5 MW and helped produce electricity at a price more than 10¢ per kilowatt-hour. Turbine generators of the 1960s, rated at 500 MW or more, helped produce electricity at a price less than 1¢ per kilowatt-hour.
The second principle was the learning curve. During World War II, shipbuilders had noticed that every time the production numbers of a ship doubled, the cost of producing one fell by a substantial fraction, perhaps 10-20%. This was due not to a few major inventions, but to the great many small ways engineers, and workers learned to do their jobs better. That learning curve effect was familiar to GE in products ranging from refrigerators to jet engines.
In applying these two principles, GE neglected a third one: dislocations of scale. This had struck its turbine business in 1903 and again in 1919, as detailed in earlier chapters. Increasing scale uncovered problems not seen in the smaller size.
The turnkey faith was a belief that, for nuclear reactors, economies of scale and the learning curve would outweigh dislocations of scale. That faith in the power of scale and learning was not unique to GE. It was widespread across the government-industry nuclear complex. For example, it was not GE but the AEC that predicted a 1962 report that nuclear power was already nearly economically competitive in high fuel cost areas, and could, by the year 2000, supply 50% of U.S. electricity. Westinghouse expressed its similar faith by immediately joining GE in 1963 with its own turnkey program. Over the three years 1963-1966 the two companies contracted for a dozen turnkey plants. (547)
There were a few skeptics. Within GE, the company's most distinguished nuclear expert, physical chemist Karl Cohen, did not agree with the turnkey faith. As he put it many years later,
at the beginning of the commercial nuclear industry, economics comparisons with the fossil fuel power industry were based more on faith than on fact. Until plants were designed and built the capital costs were unknown. (548)
He suggested in 1963 that GE take it slow and deal with the dislocations of scale at each size before moving on to the next. This advice was not taken. In 1966, before that first 550 MW turnkey plant had been completed, GE had contracted to build two. 1065 MW turnkey nuclear plants for the TVA, in the middle of cheap coal country.
Charlie Elston, a leading steam turbine engineer, was experienced in the issues of dislocations of scale. "We learned in the Turbine business," he said, "that when you move so fast that you can't benefit from experience then you are in trouble." He added that, regarding nuclear
The executives who were involved on the GE side — Fred Borch and others from Appliance — didn't realize that they were dealing with something much bigger than appliances. They swallowed the Boston Consulting Group idea that you gain cost leadership by volume production. (549)
Looking back from 1977, Jim Young, at one time top manager of the nuclear department, agreed. "We didn't allow reactors to mature enough to make new steps," he said. "cost competitiveness was the emphasis… the whole industry allowed the technology to move too fast." (550)
As the turnkey program played out, the critics proved correct. Dislocations of scale overpowered economies of scale and the learning curve. Indeed, the learning curve proved negative. Cost overruns on later and bigger projects exceeded those on earlier and smaller ones. The bigger plants did not produce cheaper power. In 1966, GE and Westinghouse both discontinued their turnkey programs. The financial bottom line for the programs was a combined loss to GE and Westinghouse of about a billion dollars. GE would confess in its 1966 annual report that
World-wide site preparation and construction costs have risen very sharply over the levels estimated when the Company undertook most of these turnkey projects. Further losses will be incurred in filling those turnkey orders still on the books.
and in 1967 that
These orders, important in getting this new industry under way, have been a major factor in keeping this business from being profitable and are no longer being accepted. However, costs to be incurred in construction of these plants will continue to affect earnings adversely.
Despite this financial fiasco, GE declared turnkey a success. As hoped, the nuclear power industry did take off. Orders per year increased from three in 1962 to 38 in 1972. GE and Westinghouse roughly evenly shared most of these sales. The industry seemed launched on a trajectory that would result, by the year 2000, in 1000 U.S. nuclear plants producing half of the nation's electricity.
This claim of a takeoff did not result entirely from the merits of nuclear. It fed on the emerging problems of nuclear's rivals. The main one, coal, faced multiple challenges. The still strong miners union gained substantial wage increases in the 1960s. The Clean Air Act, passed in 1963, made it likely that many coal fired plants would have to add expensive scrubbers to remove such pollutants as sulfur oxides from their exhausts. As for coal's fossil fuel rivals, oil seemed too dependent on imports, and natural gas too scarce. So despite its as yet unproven economics, the 1970 prospects for nuclear power seemed promising. It still had the strong support of the Federal government. Public opposition, though growing, was as yet scattered and unorganized.
In sum, for GE's big diversifications in the decade 1960-1970, progress had not yet led to profits. Computers had been abandoned. GE's aircraft engines were still seeking a major place on commercial airliners. Nuclear power was becoming popular with utilities, but still hemorrhaging money.
In that 1960s decade, GE had not limited its diversification to those three big gambles. In addition, top management took the advice of that Growth Council. It launched efforts in the new fields of community development, education, housing, and industrial and personal services. The community development and housing effort was largely an attempt to achieve "spinoff" from the now deemphasized aerospace businesses. For example, GE's missile nose cone department changed its name to "Re-entry and Environmental Systems". It sought to apply aerospace know how to such fields as cleaning up cattle feed lots and producing prefabricated housing. Alas, little learned in the sheltered, highly specialized, gold plated world of military contracting neatly transferred to cow manure and construction. (551)
GE also tried to enter the field of education via a joint venture with Time Magazine. This venture, called General Learning, tried to marry Time's mastery of content with GE's mastery of electronics. It briefly got off the ground, but in 1966 collapsed and then faded away. More generally, strategizing growth in trendy new areas did not pay off for the 1960s GE. Branching too far from the Edison Elm, these efforts neither involved the company's technological strengths nor addressed already familiar markets. (552)
What did pay off was the old tactic of fast following the ideas of others in areas closely related to the old GE. For example, GE had been trying since the 1890s to electrify main line railroads. Then, from the 1930s through the 1950s it watched as General Motors sold the railroads a less technically elegant idea more suitable to the railroads' shrunken pocketbooks: the diesel electric locomotive. GE had experimented with diesel locomotives since 1910. In the 1950s it became a follower of GM. It did so in a way that seemed to offer the city of Schenectady an offset to the departure of other GE businesses. Schenectady's first main industry had been locomotive building. It still in 1950 held the biggest works of the nation's #2 steam locomotive builder, ALCO. That company had by 1950 followed GM into diesels. Why not merge the two local giants, each supplying the technology it knew best? In the 1950s this GE-ALCO diesel electric locomotive effort moved into the #2 position in the declining railroad industry's one growth area.
Sadly for Schenectady, local boosterism and technology nostalgia cut no ice at GE headquarters. The company came to see ALCO's contribution as both low in quality and a drag on GE's high tech image. It cut ALCO loose. It took the whole effort off to its own Transportation Department in Erie, PA. There GE introduced in 1961 its own diesel-electric. By 1967 it had sold 1000 of them, and had become a solid #2 to GM. In the 1970s it moved up to #1. The business made money for the rest of the century. In the 21st century, merged with a similar Westinghouse effort, it continues to be a top U.S. locomotive maker. (553)
Another old technology, the gas turbine, also came into its own in the 1960s. It had already been an old idea in 1941 when the pioneering efforts of European companies such as Brown Boveri convinced GE to follow. GE installed the first commercial U.S. gas turbine for electricity generation at an Oklahoma utility in 1949. It then struggled for two decades to find a place for this potentially, but not yet actually, high efficiency prime mover. Turning invention into innovation required intensive development efforts in such areas as high temperature alloys and understanding the details of gas turbine thermodynamics and aerodynamics. In addition, the inability of gas turbines to run on coal, the lowest cost fuel, made them less attractive to utilities. Repeatedly in the 1950s and early 1960s GE was on the verge of dropping its gas turbine effort. (554)
It was an apparent diversion that saved the business. As an alternative to the diesel locomotive, GE developed by 1949 a portable gas turbine to drive the electricity generator on an electric locomotive. The Union Pacific Railroad bought and operated 25 units in the 1950s. They proved too expensive to rival the diesel. The development, however, would spark an idea.
Charlie Elston became in the early 1960s the manager of a struggling GE Gas Turbine department. At that time the gas turbines sold to utilities were, like steam turbines, individually designed for each customer. That both increased costs, and caused unacceptably long production times. A utility seeking immediate power additions to deal with potential blackouts or brownouts could not wait.
Elston recognized that the locomotive gas turbines were, by contrast, uniform in design and rapidly producible. This coincided with electric utilities' post-1965-blackout need for a rapidly available means of meeting peak power demands. Packaged gas turbines based on that locomotive model met those needs. This proved the turning point in profitability for gas turbines. By the 1970s, offered with power of 50 MW or more, they became a sold and profitable GE business. (555)
Another of GE's little noticed 1960s successes had nothing to do with technological breakthroughs. The old idea behind it had been introduced by Ted Quinn back in the 1930s. The business he created to lend money to consumers to buy refrigerators had evolved by the 1950s into a department called GE Credit.
By then its managers had made a financial discovery. Due to a loophole in U.S. financial regulations, GE could borrow money more cheaply than a bank. By lending out that low-cost money like a bank, at similar interest rates, GE could make more money than could a bank.
GE Credit became an activist lender. It stepped in, for example, to reclaim shipping containers from a bankrupt shipping line, recycle airplanes owned by a busted airline, and assume ownership of the Houston Astrodome. Its profit contribution to GE would take off, from millions dollars in the 1960s to tens of millions in the 1970s to hundreds of millions in the 1980s. It was later renamed GE Finance and trumpeted as a creation of the New GE. Its actual roots in the old GE, and the contributions of its actual creators such as Ted Quinn, and 1960s manager A. W. "Ticker" Clock, were forgotten.
Finally, a big GE success story of the 1960s was that already mentioned advanced materials business. GE had faltered economically and technologically at building nuclear reactors. It had, however, succeeded at building productive, profitable chemical plants for making those advanced materials. Those included a factory for making industrial diamond near Columbus, Ohio, one for making Silicones at Waterford, NY, and one for making the new high performance engineering plastic Lexan® at Mt. Vernon, Indiana.
In conclusion, return to this chapter's initial questions. First, how well would GE perform in the 1960s at completing its three key progress-to-profits transitions? A pessimist might depict GE in 1970 as so far going zero for three. None of its three highly visible ventures had yet shown a profit. Aircraft Engines and Nuclear were still in the red in 1970, while Computers had been abandoned. An optimist might reply that two of the three were on the verge of success. GE turbofan engines were beginning to appear on commercial airliners. The turnkey program, despite its faults, had indeed unleashed a boom in nuclear.
The company's numbers offered a similar mixed message. The optimist could point out that GE's sales had reached $8.7 billion in 1970, compared to $ 4.2 billion in 1960. In other words, after a weak 1950s, GE had resumed its historical pattern of doubling in sales in a decade. The pessimist could reply that the 1960s had been a prosperous decade for the economy as a whole. The U.S. GDP, which had historically grew more slowly than GE sales, in this decade matched GE growth by also doubling. Meanwhile, GE earnings had not even come close to doubling in the decade, increasing only from $200 million in 1960 to $329 million in 1970. "We encountered," a GE report would conclude in 1979
A phenomenon affecting most large companies at the time called 'profitless growth,' which means a tremendous growth in sales without commensurate growth in earnings.
In the emerging idiom of the financial press, GE risked being downgraded from a "growth engine" to a mere "GDP company", enduring a "profitless prosperity." (556)
This mediocre financial performance suggests an at best guarded answer to this chapter's next question. How would the company's key post-war changes, Boulwarism and decentralization, perform in the 1960s? By the end of that decade GE, its main labor relations strategy of Boulwarism now outlawed, faced a unionized and united labor force. The 1972 creation of the Business Roundtable represented a circling of the Giant Corporation wagons, under perceived (and greatly exaggerated) attack from labor, the left, consumer advocates, and the environmental, and anti-nuclear movements. Individually each Giant Corporation's Political Action Committee amped up lobbying efforts. In these efforts, GE would be a leader. (557)
In addition to politically thwarting unions, GE had continued to flee them. By 1970 GE had more than 200 plants, mostly small and dedicated to just one product. They were spread over 33 states, with a majority of the additions since 1955 in the South and West. A new development from 1957 to 1961 had been the creation of some 30 overseas plants. In the years after 1960 GE employment outside the U.S would grow to one-third of its total employment.
Decentralization had come to stay. GE was, by the 1960s, too diverse to be recentralized. Though Cordiner's rigid cult of professional management was relaxed, his assertion that a professional manager could manage anything survived. The results were unfortunate. In such businesses as electronic components, computers, and nuclear, management turnover was frequent and disorienting. Symptoms of management unfamiliarity with underlying technology included missing out on integrated circuits, and wrongly assuming nuclear plant scale economies and learning curves.
Three of GE's main management consultants would later describe the pressure encouraging short range thinking that was put on Product Department General Managers. Their yearly incentive compensation, not only a big part of pay but a measure of future promotion prospects, was based only on the last's year's performance. This encouraged taking credit for short range successes, and getting out fast. "What was not normal —" the consultants concluded
And considered foolhardy by many — was staying on any job for more than three years — or staying with any business for more than a couple of assignments. Entrenchment — in fact anything standing in the way of linear upward growth — was to be avoided. (558)
The Borch administration had revised Cordiner's policies by returning some power to the top. Strategic planning was formalized and made more bureaucratic. The results were unimpressive. In the three big gambles, corporate strategy was inconsistent and unhelpful. In the search for wholly new businesses, the Corporate Growth Council strayed too far from the Edison Elm.
Even GE's sales-doubling success of the sixties owed less to new strategies than to old tactics. Encourage natural branching of the Edison Elm. Follow fast on inventions and innovations begun elsewhere. Find managers dedicated to and knowledgeable about the businesses, and keep them in place. All this was illustrated by such businesses as aircraft engines, advanced materials, diesel electric locomotives, GE Credit, and gas turbines, and by such independent minded managers as Gerhard Neumann, Charlie Reed, and Charlie Elston.
Finally, what light had those dimensions of corporate performance cast on the evaluation of corporate giant size? GE's 1960s experience was not unique. With twenty-first century hindsight it is easy to detect signs that once lean and vigorous U.S. giants such as GE, General Motors, Ford, AT&T, Kodak, and soon even IBM were growing flabby and vulnerable. They were about to face hungrier and more agile competitors. These included both entrepreneurial U.S. start ups and low wage, high productivity foreign rivals.
Twenty-first century hindsight might detect these 1960s trends. Nineteen sixties foresight did not. Business scholars instead doubled down on giant corporation dominance. In 1967 Alfred Chandler published Strategy and Structure, extolling giant corporation efficiency. John Kenneth Galbraith followed with The New Industrial State. For the giants, said Galbraith, "there is no clear upper limit to the desirable size." (559)
The most sincere 1960s form of flattery for the giants was, however, not scholarship. It was imitation. The 1960s saw the launching of the conglomerate craze. This was an attempt to achieve instant giant size by buyouts and mergers. Key corporate players included ITT, Textron, LTV, TRW, and Gulf & Western.
General Electric would proclaim itself in the 1970s to be no conglomerate. It was instead, it asserted, a naturally diverse and organic evolution of the Wizard's original electric inspiration. GE further claimed that its recent episode of Boulwarism had put labor back in its proper subordinate place. Meanwhile, GE's recent decentralization gave it the benefits of both department manager initiative and headquarters staffed corporate wisdom.
Standing against GE's rosy self judgment was that word turnkey. Had the GE 1965 turnkey program jump started the nuclear power business? In 1970 GE still thought the answer, despite the billions of dollars of losses, was yes. In 2025 that question is better answered with another, rhetorical, question. How many different and perhaps better paths to practical nuclear power (or perhaps to the even better path of bypassing nuclear's deceptive allure altogether) had GE's turnkey impatience helped close off?
Notes
- businessnovice.net/definition/turnkey-contract/
- The following discussion of the 1960s aircraft engine business history draws heavily on General Electric Co. 1979. Seven Decades of Progress. Aero Publishers. Boyne, Walter and Lopez, Donald. 1979. The Jet Age. Smithsonian Press. Garvin, Robert. 1998. Starting Something Big: How GE Got into the Aircraft Engine Business. American Institute of Aeronautics and Astronautics.
- Sutter, Joe. 2006. 747: Creating the World's First Jumbo Jet. Harper Collins. p. 127.
- Interview with Donald Craig 31 July 1985. General Electric Hall of Electrical History Collection, MiSci.
- Interview with A. C. Stevens 31 July 1985. General Electric Hall of Electrical History Collection, MiSci.
- Interview with Donald Craig 31 July 1985. General Electric Hall of Electrical History Collection, MiSci.
- Interview with Donald Craig 31 July 1985. General Electric Hall of Electrical History Collection, MiSci.
- The above discussion of 1964-1970 labor relations is based on Don Craig's HoH oral history, A. C. Steven's HoH oral history (MiSci), and coverage in the Schenectady Gazette, esp. Feb 13, 1968. p. 15. Albany Times Union 31 Dec 1966 p. 1. Bella, Salvatore J. 1962. Boulwarism and Collective Bargaining at GE. Cornell Ph.D. Thesis. esp. pp. 208-215, 250-267.
- Works News 12 Sept 1969; 15 Jan 1971.
- National Labor Relations Board, "GE Company and IU of E, R and MWA, Cases No. 2-CA-7581 et. al., 150 NLRB No. 36, 1964. Phillips-Fein, Kimberly, American Counterrevolutionary: Lemuel Ricketts Boulware. In Lichtenstein, Norman. ed. 2006. American Capitalism. Penn. p. 269.
- New York Times Nov 22 1969.
- Nace, Ted. 2010. Gangs of America. Berrett-Koehler. pp. 142-143. Akard, Patrick J. 1992. Corporate Mobilization and Political Power. American Sociological Review. 57. 597-615. Hacker, Jacob and Pierson Paul. 2010. Winner Take All Politics. Simon and Schuster. pp. 130-140.
- The 600 number is from Briere, Shenandoah. GE Union OKs Deal for Pay Raise. Daily Gazette 20 Apr 2023 p. 1. [SCPL card required]
- John Fisher to Fred Borch. 2 Aug 1965. John Fisher Papers. Box 2018-14. MiSci.
- Fisher, Franklin F. et al. 1983. IBM and the U.S. Data Processing Industry. Praeger. p. 65.
- The description here of time sharing and its consequences is taken largely from Campbell-Kelly, Martin and Aspray, William. 1998. Computer. Basic Books.
- Robert N. Hall, personal conversation with author, ca. 1985 and Interview #443, IEEE History Center.
- Bueche, Arthur. 1968. Speech to Division General Managers' Meeting. 22 May 1968. Bueche Papers. MiSci.
- Oldfield, Homer. King of the Seven Dwarfs. IEEE. pp. 186-189.
- Oldfield, Homer. King of the Seven Dwarfs. IEEE. pp. 170-199.
- Dorn, Philip H. 1985. "Learning from Lemons". Datamation. 15 Jan 1985. [free PDF viewer required]
- Lee, John A. N. and George E. Snively. The Rise and Sale of the General Electric Computer Department: A Further Look. [free PDF viewer required] 2000. IEEE Annals of the History of Computing. 1 April 2000.
- Time Magazine. 1959. Atomic Energy: the Powerhouse. 12 Jan 1959. p. 75.
- GE News Bureau 24 Sept 1964. MiSci.
- Zinn, Walter H. and Pittman Frank. 1964. Nuclear Power U.S.A. McGraw Hill. pp. 17, 24.
- Cohen, Karl. 1992. A Promise Unfulfilled. [free PDF viewer required] 19th International Conference on the Unity of Science. Seoul, Korea. p. 21.
- Charles Elston. Interview 19 July 1984. General Electric Hall of Electrical History Collection, MiSci.
- James F. Young Oral History. 1 July 1977. General Electric Hall of Electrical History Collection, MiSci. Interviews with James F. Young 7/19/84, Charles Elston 9/17/86, Karl P. Cohen 9/17/86.
- Appelbaum, Binyamin. 2023. Why Do We Build Houses in the Same Way That We Did 125 Years Ago? New York Times 18 Dec 2023 describes the 1960s housing technology effort, in which GE was a leading participant.
- New York Times 20 April 1966.
- Churella, Albert. 1995. Corporate Culture and Marketing in the American Locomotive Industry. Business History Review 65.191-229.
- Howard, Alan. 1949. Two Gas Turbines for Power Generation and other Applications. AIEE Technical Paper 49-114. Gülen, S. Can. 2019. Gas Turbines for Electric Power Generation. [partial preview, free PDF viewer required] Cambridge. pp. 39-74.
- Bruce Buckland. Interview 25 Feb 1980. General Electric Hall of Electrical History Collection, MiSci.
- Strategic Management for the 1980s. GE, 1979. General Electric Hall of Electrical History Collection, MiSci. See also Demaree, Allen T. 1970. GE's Costly Venture into the Future. Fortune. Oct 1970. p. 58.
- Nace, Ted. 2010. Gangs of America. Berrett-Koehler. pp. 142-143. Akard, Patrick J. 1992. Corporate Mobilization and Political Power. American Sociological Review. 57. 597-615. Jacobs, David C. D. 1999. Business Lobbies and the Power Structure in America. Quorum. p. 16.
- Kane, Donald. Tichy, Noel. Andrews, Eugene. 1987. A Leadership Development Framework. GE OEN-6. Nov 1987. General Electric Hall of Electrical History Collection, MiSci.
- Galbraith, John Kenneth. 1967. The New Industrial State. (2007 edition, Princeton U. Press) p. 96.