Outlook: A break-up beckons for GEC

On prospects for BskyB, interest rates and gec
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The Independent Online
Today is the deadline Lord Simpson set himself three months ago for sorting out GEC's component parts. Unfortunately, there is unlikely to be any grand announcement from Stanhope Gate this morning, nor any puff of white smoke over Mayfair. Setting deadlines is usually a futile exercise, guaranteed to be all the more so when dependent on a lumbering giant like GEC being rolled into action.

So there will be no announcement today about the flotation of GEC Alsthom, the power engineering business that is jointly owned with Alcatel Alsthom. Nor will there be news of the "repositioning" of the telecoms joint venture GPT - a term which has generally been taken to mean the sale back to Siemens of GEC's 60 per cent stake.

Nor will there be any news that GEC Marconi has pulled off the grand restructuring of the European defence industry that will enable it to stand shoulder to shoulder with the likes of Raytheon, Lockheed Martin and Boeing of the US.

Since Lord Simpson began his strategic review a year ago the sand has shifted considerably under GEC's feet. One interpretation of the "rationalise or die" remark made on Monday by the Defence Secretary George Robertson, is that a merger of GEC Marconi and British Aerospace is back on the cards.

On the face of it, it would be remarkable if his opposite number at the Department of Trade and Industry, Mrs Blockit, took a similar view, since every consolidating merger that has passed her way so far has been packed off to the Monopolies and Mergers Commission. BAe and Marconi might just be different, however. Defence procurement is not a competitive market in any true sense since there is by and large, only one customer and the Ministry of Defence can always call on the Americans if it wants to keep the bidding open. So a merger with BAe cannot be ruled out.

The effect would be to turn Lord Simpson's strategic review into the piecemeal dismantling of GEC. With GEC Alsthom, GPT and Marconi all packaged off, that would only leave Lord Simpson with a rump industrial electronics business to run. Even that might be demerged into two given that half of it is made up of discrete US businesses that could be separately floated. What a tawdry end that would be for Lord Weinstock's great great creation.

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