Editorial: An Icon Departs

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  Space News Business

Editorial: An Icon Departs

posted: 06 February 2006
12:06 pm ET


Top satellite industry executives have come and gone over the years, but Bernard L. Schwartz, who on Feb. 1 announced plans to retire as chairman and chief executive of Loral Space & Communications Inc., has been a fixture.

The ultimate survivor, Mr. Schwartz has both driven and weathered the upheavals that have shaken and shaped the satellite telecommunications landscape for the last decade and a half. Through it all, he has never lost touch with his signature traits — pizzazz, brass, faith and vision. With his departure March 1, the industry loses perhaps its most visible representative and certainly one of its most committed statesmen and advocates.

Mr. Schwartz became legendary on Wall Street and in the defense industry for the savvy and toughness he displayed in building Loral Corp. — a small and struggling defense electronics firm that he took over in 1972 — into a successful multibillion-dollar conglomerate. He did this primarily through numerous bold yet shrewd acquisitions, often outmaneuvering rival bidders with brilliantly creative financing schemes.

But it was on the commercial satellite industry that the ever-entrepreneurial Mr. Schwartz chose to risk his legacy.

In 1996, Mr. Schwartz sold Loral’s defense business to Lockheed Martin for $9.1 billion. He kept for himself the company’s space business — consisting primarily of satellite manufacturer Space Systems/Loral and his stake in the Globalstar satellite telephone venture. His new company, Loral Space & Communications, went on to acquire AT&T Skynet and Orion Network Systems, thereby firmly establishing itself as a player in geostationary satellite services as well as manufacturing.

As a defense and satellite industry executive, Mr. Schwartz was always different — a proud Democrat cavorting on overwhelmingly Republican turf. More importantly, he is not an engineer, as are many of his peers, but a finance person. He ran Loral’s far-flung enterprises from a New York office based largely on balance-sheet calculations.

Mr. Schwartz gets much of the credit for giving the commercial satellite industry visibility on Wall Street during the telecom boom of the 1990s. As he departs, he leaves an industry that, for better or worse, is now largely in the hands of private-equity houses — financial specialists like himself.

For all of his achievements, Mr. Schwartz will best be remembered by some as a central figure in the satellite technology-export rhubarb of the late 1990s, and for betting the farm on Globalstar, whose collapse nearly ruined Loral Space & Communications and cost investors dearly.

He’ll have to take his lumps for Globalstar — a lot of smart people made the same mistake — but the export flap was blown way out of proportion, largely for political reasons. Although it is clear that certain Loral employees improperly shared controlled technology with China following the destruction of a Loral-built satellite on a Chinese rocket, there has been no evidence presented in public to date that the transgression was anything more than an administrative error, for which the company was penalized by the U.S. government.

Mr. Schwartz’s close ties to the Democratic Party made him a target of some congressional Republicans who were hell-bent on fanning the flames of the satellite-export controversy. One lawmaker went so far as to suggest that Loral, and rival satellite company Hughes Space and Communications Co., had betrayed their country. Politics is a rough game, but attacks impugning Mr. Schwartz’s patriotism were way off target and out of bounds.

Globalstar was indeed one of Mr. Schwartz’s few business miscalculations, but it was a very costly one. Globalstar’s failure, coming amid an overall downturn in the satellite communications industry, dragged Loral into bankruptcy.

It also set the stage for Mr. Schwartz’s last feat of business wizardry — resuscitating Loral Space & Communications when many had written it off for dead. He did this by engineering the sale of Loral’s Atlantic satellite fleet to Intelsat, erasing a large chunk of debt, and leveraging the company’s bankruptcy status to build a strong backlog of new satellite orders for Space Systems/Loral.

Speaking immediately after Loral’s exit from bankruptcy this past November, Mr. Schwartz was as audacious as ever, saying Loral was actively looking to expand its Skynet fleet, possibly by buying on-orbit satellites Intelsat might be forced to sell to alleviate antitrust concerns that could arise from its pending purchase of PanAmSat Corp.

It wasn’t hollow bluster. As it turns out, he was angling to buy New Skies Satellites N.V., a move that would have effectively reconstituted the pre-bankruptcy Loral Space & Communications. Closing that deal would have been a fitting coup de grace, but New Skies ultimately was sold to SES Global of Luxembourg.

So Mr. Schwartz will have to settle instead for having made a lot of people a lot of money, losing a lot for some others, helping to build an industry, and going out — at age 80 — on his own terms.