LucasVarity seeks US alliance or merger

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LUCASVARITY, the Anglo-American car components and aerospace group, is in talks with half a dozen US automotive suppliers about strategic alliances or even full-blown mergers.

The company, which failed last year in an attempt to move its stock market listing and headquarters to the US, confirmed yesterday that "preliminary discussions" were taking place with a number of companies.

LucasVarity aims to announce the results of the strategic review alongside its full-year results on 25 March, but it cautioned yesterday that there was was no certainty that any of its discussions would result in a definitive agreement.

Most attention has focused on a possible link-up between LucasVarity and TRW, the Cleveland-based car components and defence contractor. TRW makes airbags, seat belts, suspension components and steering systems, and its automotive division has annual sales of $7bn.

But industry sources said discussions were taking place with at least five other US companies, led by Federal Mogul, which took over the British car parts group T&N last year, Tenneco, Dana and Borg Warner.

LucasVarity is also thought to be examining the possibility of deals with Visteon and Delphi, the car components arms respectively of Ford and General Motors, both of which are due to be spun off as separate companies this year.

Following the defeat of his plans to relocate to the US, Victor Rice, chief executive, has redoubled his efforts to refocus LucasVarity on the North American market.

Mr Rice argues that a New York quotation would improve the rating of LucasVarity shares and make it easier for the group to raise capital and finance expansion by issuing new shares. LucasVarity's strategy is to expand its presence in vehicle dynamics, which embraces brakes, chassis, suspension and steering. About half its pounds 3.4bn of automotive sales comes from braking systems.

At one time LucasVarity's aerospace division was a contender for disposal but Mr Rice is on record as saying: "The more I look at our aerospace business, the more I like it."

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