A non-executive chairman is expected to replace him.
The early departure of Mr Cahill, 64, comes at a time when GEC seems keen to resume long-standing talks with BAe over a pounds 7bn merger of the companies' defence electronics and hardware businesses.
The dramatic improvement in BAe's finances after last week's proposed pounds 800m sale of Rover to BMW appears to have provided the catalyst for renewed interest after talks were abandoned in July.
Mr Cahill joined BAe as executive chairman at its darkest hour 20 months ago. Professor Sir Roland Smith had been ousted as chairman in a boardroom coup in 1991 along with finance director Dudley Eustace after an unexpected fall in profits, property write-offs and a rights issue. The chief executive, Dick Evans, a key figure in procuring important defence sales, survived the coup.
Mr Cahill signed a five-year contract at dollars 800,000 ( pounds 540,000) a year, so could be entitled to a pay-off approaching pounds 2m. In addition, share options granted on his appointment are worth another pounds 2m after a sharp recovery in BAe's share price from a low of 120p in late 1992 to 575p on Friday.
Mr Cahill's standing had suffered from the failure of BAe last year to complete a deal to put its loss-making regional jets business into a joint venture with Taiwan Aerospace Corporation.
Mr Cahill, who retired unexpectedly early as chief executive of BTR in 1990 after the conglomerate failed to take over the US Norton abrasives group, had been closely involved in the Taiwan talks.
Company sources also suggested that Mr Cahill's BTR-style drive for lower costs and improved cash flow had clashed with the sales-oriented culture that pervades BAe's defence and aerospace activities.
'It has been an uphill struggle from the outset,' said a company source. 'He has not found it easy to impose his ideas although at every stage he has had the full support of the board.'
Observers were surprised by Mr Cahill's absence from the BAe ranks at last week's announcement of BAe's sale of Rover although the company said that he was engaged on business in the US.
Under Mr Cahill, BAe has embarked on an extensive pounds 1.3bn disposal programme involving the sale of the company's corporate jet business, its Ballast Nedham construction activities, data processing assets and Rover.
A pounds 1bn provision to cover the restructuring of BAE's regional jet business led BAe to report one of the largest UK corporate losses in 1992. On Friday the company announced a pounds 250m provision to meet lease exposure in its loss-making turboprop activities.
Honda Motor may pull out of Rover Group if the company loses its British status as a result of control by BMW, Nobuhiko Kawamoto, Honda's president and chief executive, said yesterday.
'If it becomes only a joint venture with BMW, and Rover thereby ceases to be a British company, our co-operative relationship with Rover will not last long,' Mr Kawamoto said in a television interview. Honda has 20 per cent of Rover, which was sold by BAe to BMW for pounds 800m last week.Reuse content