The draining process cost thousands of employees their jobs and left the former TWA president less emotional about life.
“It's a tough time, and everyone is changed by the process,” Pearson said. “I was greatly disappointed with not being able to stay with TWA and see it work. That's probably folly, but it feels like falling off the horse and not being able to get back on.”
Pearson said his first meeting with the company's largest shareholder was somewhat confrontational.
The two met face-to-face for the first time a few days after Icahn gained control. The famed corporate raider began the conversation saying he wouldn't make Pearson any commitments. The TWA president responded that he didn't know whether he'd stay with the airline.
“It was probably like any time you meet anybody who is seen as a threat to whatever it is you're doing,” Pearson said. “His big attack at the time was that the executives were fat-cat, country-club guys who didn't work hard and didn't really represent the shareholders. That puts you on the defensive immediately.”
But the relationship improved shortly after Icahn gained control of the company. Both men learned to respect each other.
“We didn't agree on many things because those guys generally are more short-term managers while the people who had been there for quite a while were taking more of a long-term view,” Pearson said. “But he didn't lie to me, and I didn't lie to him.”
Pearson was the last TWA executive to leave the airline after Icahn gained control.
“I think maybe it was simply because I truly believed eventually we would prevail. Not that we would get Carl out, but that we would be able to live with a major shareholder,” Pearson said. “Obviously that was naive on my part. But I believed in TWA, and I believed in the people at TWA.”
Ultimately, however, Icahn fired Pearson and replaced him with his hand-picked successor. About six months after leaving TWA, Pearson became vice president of operations administration at American Airlines.
Icahn declined to be interviewed for this story.
Icahn gained control of TWA in September 1985. Three years later, the controlling shareholder took the company private in a move that cost the airline more than $610 million, $469 million of which went directly to Icahn. The privatization also left the company with an additional nearly $540 million in debt.
In July 1991, Icahn sold some of TWA's most profitable routes, including service from New York, Los Angeles, Boston and Chicago to London to American Airlines for $445 million. TWA filed for Chapter 11 bankruptcy protection six months
Icahn resigned as chairman in January 1993.
Pearson doesn't blame Icahn for the airline's eventual collapse.
“The airline business is a tough business,” he said. “We had serious, serious problems in terms of costs and aging airplanes that we would have had to solve ourselves. I like to think we would have solved that, but who knows.
“I don't think anybody can say he is responsible for the demise of TWA, but I certainly think he sped up the process.”
Icahn's strategy in 1985 for then-Bartlesville-based Phillips Petroleum Co. was similar to the model he followed at TWA, Marathon, Texaco and numerous other
Phillips shut down many of its research programs in effort to streamline the business and increase shareholder value.
“Some of those programs were long shots, but the oil business has to do with long shots,” said C.M. “Charlie” Kittrell, who was executive vice president of Phillips Petroleum Co. when Icahn tried to take control just months after the company fought off a buyout attempt from T. Boone Pickens.
“We had research in nuclear energy that looked promising. And as far as exploration is concerned, how do you know if your having to cut back on exploration cost you the chance to discover the big field?”
Kittrell also said having to sell or close those units quickly cost Phillips the opportunity to sell those divisions for higher prices.
“Having to do those things under stress like that is not a very good thing,” Kittrell said. “If something like that has to be done, we'd rather do it on our own terms than have it forced down our throats like that.”