CONGLOMERATES: Godfatfier’s Godfather

What is better than a good businessman? Answer: a good lucky businessman. Charles Bluhdorn, the highly creative and sometimes abrasive chairman of Gulf & Western Industries, is just that. In the 1960s he built G. & W. into a prosperous conglomerate, piling one acquisition atop another, from auto parts to zinc mining. But along with many other conglomerates, G. & W. foundered when tight money and recession struck a couple of years ago. Now Bluhdorn is making a comeback, lifted by a business where luck is a necessity: motion pictures. In his palmier days, Bluhdorn bought Paramount Pictures, lately the producer of The Godfather, which will probably be the biggest moneymaker in cinema history.

Bluhdorn is fortunate, because five years ago his Paramount executives bankrolled an obscure author, Mario Puzo, while he wrote The Godfather. Paramount got the rights to the screen version for a mere $80,000 plus 21% of the net profit for Puzo. Thanks to fine scripting, directing and acting, the picture stunned both critics and commoners (TIME, March 13). Only eight weeks after release, it has grossed nearly $50 million.* By the end of G. & W.’s fiscal year in July, The Godfather is expected to show a pretax profit of $10 million. According to industry experts, the movie may eventually earn $80 million in profits for G. & W. At the same time, G. & W. has another smash, Love Story, that will bring in an additional $16 million this fiscal year. Other promising films are in the works: a sequel to The Godfather, The Great Gatsby with Ali MacGraw, and, improbable as it seems, Albert Speer’s Inside the Third Reich.

Vienna-born Bluhdorn, now 45 and a bit thinner and grayer than when he was the wunderkind of conglomerates several years ago, expects that The Godfather will lift G. & W. earnings close to their alltime record set in 1968. The company is likely to report sales of around $1.6 billion and net operating profits of slightly under $68 million, up $ 13 million from last year.

The Godfather will make G. & W.’s Leisure Time Group its second most profitable arm. The company’s top moneymaker is Associates Corp. of North America, a finance and insurance subsidiary that brings in some 47% of the profits. Like other conglomerates, G. & W. in the past propped up reported profits by taking advantage of liberal accounting rules. For example, in 1967-68 G. & W. sold many of Paramount’s old films and recorded earnings from the deal as straight operating profits, instead of nonrecurring gains. But G. & W. has not made such sales lately, and outside accountants who have read its recent financial statements say that the “quality” of its earnings is higher than in past years.

To revitalize the company, Bluhdorn has sold off unprofitable plants and cut staff. In addition, he says, “We brought in new top managers in almost every division.” G. & W. is doing considerably better than several still troubled conglomerates, including LTV, Litton and Teledyne. Wall Street is taking notice. Last week G. & W. stock was selling in the mid-40s, way up from its 1970 low of $9.

*IRS agents are checking into the prices of tickets to The Godfather. In Washington, price controllers are debating whether theaters can legally raise prices for a smash hit. Tickets in Manhattan cost $4, v. $3 for previous movies.