Beleaguered TV-maker Zenith Electronics Corp. got an unaccustomed chance to bask in good news on two fronts Thursday and saw its stock soar.
Zenith announced a $1 billion deal to make digital TV set-top boxes for Americast, a partnership of phone companies and Walt Disney Co., and said it will build a $100 million picture-tube factory in Woodridge, boosting its U.S. employment.
Investors reacted to Zenith’s glad tidings by bidding up its stock $5.50 a share, to $16.87, on the New York Stock Exchange, a one-day gain of 48 percent.
It was reminiscent of a spurt Zenith’s stock took in May on news of a partnership with Skokie-based U.S. Robotics Corp. to make hybrid cable TV modems to enable people to surf the Internet at higher speeds than can be achieved over telephone lines.
The new plant in west suburban Woodridge, which will build large-screen picture tubes, is expected to create 280 full-time jobs. It will consist of 325,000 square feet of floor space on a 70-acre site and is scheduled to be finished by the middle of next year.
Glenview-based Zenith also is spending $80 million to expand its picture-tube factory in Melrose Park, creating another 120 jobs. That expansion, expected to be completed next year, will modernize its operations and add a facility to make high-resolution computer tubes.
Both investments are being made with tax breaks and incentives from state and local governments that should save the company some $19 million over the next 20 years.
“Other states heard about this potential investment and were after us to put the investment in their state . . . but the various levels of government worked together to keep us here,” said Peter S. Willmott, Zenith’s interim chief executive, who announced the new plant along with Gov. Jim Edgar at a Loop news conference.
Under the deal with Americast, Zenith will provide at least three million digital set-top boxes over the next five years. The boxes will accommodate several video-delivery systems, including direct broadcast satellite and so-called wireless cable as well as traditional fiber-coaxial cable and optical fiber.
The boxes will be built at a Zenith facility in Mexico. Although Zenith has provided analog equipment for the cable industry for years, this represents a new direction in digital equipment, said William G. Luehrs, president of Zenith’s networks systems division.
“This is a big deal for us,” Luehrs said, “both from the standpoint of the scope of this contract itself and that it places Zenith squarely in the digital future.
“Americast is the first home-entertainment company requiring multiple delivery media from essentially the same box design,” he said. “It brings a unique vision.”
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Americast partners include Chicago-based Ameritech Corp., BellSouth Corp., GTE Corp., SBC Communications Inc. and Disney.
The plant expansions and Americast deal are in marked contrast with Zenith’s continuing losses and the news last month that its chief executive and chairman, Albin F. Moschner, was leaving the firm.
Moschner had arranged for LG Electronics Inc. of South Korea to buy control of Zenith last year in a deal worth $350 million, and he also negotiated the deal with U.S. Robotics that temporarily boosted the firm’s stock. But he left with a golden parachute valued at roughly $5 million after second-quarter losses came in at $33 million and losses for the first half of the year were $68.5 million.
The factory expansions also are a departure from the company’s long-term strategy, which has been to shift virtually all of its assembly work to low-wage maquiladoras in Mexico.
Although Thursday’s news may promise improve the bottom line, company officials shied away from promising a quarter in the black anytime soon. The firm’s main enterprise of building color TV sets has been beset with prices that fall faster than Zenith can reduce costs, and until that changes, company officials said, losses will continue.