COMMENT: It looks like Year Zero for GEC

Click to follow
The Independent Online
Quite what Lord Weinstock makes of GEC Mark 2 was being kept under wraps yesterday but, like all dowagers parted from their estates, it is a fair bet that he is less than overwhelmed by what the young(ish) pretender George Simpson proposes to do with his inheritance. Not content with tearing up the Weinstock lines of management reporting and clearing out his boardroom cronies, the new managing director of GEC is unpicking the very foundations on which the group has been built. Good God, he is even threatening to give cash back to shareholders, unless a better purpose is found for the company's famous cash pile.

These are the actions of any new recruit drafted in to manage the business on behalf of shareholders and destroy all vestiges of the old feudal kingdom. The sense that this is Year Zero for GEC is best symbolised by the departure from Stanhope Gate, its headquarters from the very earliest Weinstock days, in favour of new premises in another corner of Mayfair. where, incidentally, there will be no billet for GEC's chairman emeritus.

In GEC, Mr Simpson has inherited one one of a small number of British companies which can realistically claim to be world class. But its track record demonstrates painfully that joint venturing is not the way to maximise shareholder return. GPT, the telecoms joint venture with Siemens, and GEC-Alsthom in power engineering, were created to protect GEC from takeover and compensate for its lack of world beating technologies in gas turbines and telecoms. (Who remembers System X?) Not surprisingly, they have proved lousy at maximising shareholder returns.

So, provided Mr Simpson can persuade the French to his way of thinking, GEC Alsthom will be hived off, GPT "repositioned" and the defence business Marconi turned via acquisition into a fighting force fit to take on the Yanks. Talking strategy is the easy bit. Delivering is another. Most interesting will be to see how Mr Simpson fares with Marconi. He would love to marry it to Thomson CSF of France, or an American defence electronics company. Unfortunately French political chauvinism and Pentagon black programmes bar his way. What about GEC's old flame of British Aerospace? Here again Labour's dislike of mergers may block his path. As his predecessor could no doubt tell him, at GEC there are no quick fixes.

Comments