Lord Weinstock, 71, will stay on as honorary chairman, an appointment that was greeted with a mixed response from analysts who fear he may be tempted to interfere.
But Mr Simpson, 53, whose Lucas contract does not expire until March 1997, is thought to have secured assurances from the GEC board about his right to manage.
Lord Weinstock's role will be a non-board post, though the company said GEC would "have available the benefit of his long experience and profound knowledge of the company."
In a short statement GEC said that Mr Simpson would join "as soon as he is free to take up the appointment", giving Lucas time to find a replacement to ensure an orderly transition.
Speculation about Mr Simpson's future has been a cloud over Lucas's shares and is likely to remain so until uncertainty about his successor is clarified, analysts believe. It is possible that GEC may have to buy out the remainder of Mr Simpson's Lucas contract.
GEC has consistently underperformed the market in recent years, and investors have long wanted a new managing director to re-energise the diverse group. One GEC insider said: "There has been a lot of marking time around here while we wait for things to change at the top."
Although Mr Simpson has been the frontrunner to succeed Lord Weinstock, his appointment is not without its critics who consider that he may find the transition from the motor industry difficult. However, an analyst said yesterday: "George Simpson is a very good industrialist and a good strategic thinker. And what GEC needs now is a new strategy."
Mr Simpson joined Lucas two years ago from British Aerospace, where he was deputy chairman and ran the Rover group before it was sold to Germany's BMW. Evidence of the improvements being made at Lucas should be revealed in today's interim results.
Some analysts believe that Mr Simpson's inside knowledge of BAe, a long- rumoured GEC bid target, was a key to his appointment. GEC favours forging a national "champion" defence group with BAe to compete with the giant US organisations. However, BAe has been at the forefront in pursuing cross- border mergers as part of the consolidation in the European defence industry.
Mike Styles, analyst at Credit Lyonnais Laing, saw Lord Weinstock's role as useful for Mr Simpson, as there are few people that truly understand the whole company. "It is reassuring for the market that Lord Weinstock and his contacts will remain," he said. GEC shares were down 5p to 359.5p, while Lucas fell 4.5- to 192p.