Time to step aside after an industrial revolution

THE MONDAY INTERVIEW; Sir David Lees; The chairman of GKN is satisfied that a crucial restructuring is complete as he prepares to hand over to a new man. He talked to Russell Hotten

Stepping across the threshold of GKN's headquarters in St James's, London, is like entering a private club. A doorman ushers visitors into a creaky old lift that slowly rises to the executive offices. A butler is on hand to serve tea while you wait in oak-panelled rooms lined with oil paintings. The Guest family, who 100 years ago established what became GKN, would not have felt out place lounging on the sofas in the drawing room. This outpost of bygone days gives no suggestion of the transformation that the old firm of Guest Keen & Nettlefolds has undergone in the 25 years that Sir David Lees has been there.

"I think that 1995 was something of a landmark for us," says the chairman. "Last year represented the end of a major phase in terms of our divestment programme." With the job of restructuring completed, Sir David, 60, is going part-time, becoming non-executive chairman when GKN recruits a new chief executive. It will be a tremendous wrench handing over to someone else, but at least he has the satisfaction of "quitting" while ahead. As the 61 per cent jump in profits last Thursday revealed, GKN is in good health and the company has never been higher in the FT-SE 100.

Now GKN has been streamlined into three core international businesses - automotive, defence, business services - the question in the City is whether the company is now fully focused. "Yes," maintains Sir David. "Though the business must continually evolve to stay ahead." There will be no fourth leg added to the company, but as GKN has pounds 464m in the bank most observers are expecting some acquisitions.

The company has long been talked of as a possible bidder for the tanks- to-cars group Vickers, though Sir David expresses mild weariness at being asked about subject again. "It is just the Friday night rumour mill doing the rounds. There is no logic in GKN owning Vickers' Rolls-Royce cars, for instance. We are not interested."

But he frankly admits there is scope for collaboration between their defence businesses, as part the necessary consolidation going on between arms companies throughout Europe. "If you agree that European defence companies need to restructure, I do not think that it requires a master strategist to see that the UK has got some rationalising that it can do itself. There is some logic to laying bits of GKN and Vickers together. But you can rationalise without companies taking over each other."

GKN, maker of the Warrior personnel carrier, and Vickers, which makes the Challenger 2 tank, are among four companies in the UK producing a range of armoured vehicles. Sir David says: "The domestic market is unlikely to be able to support four companies. It is not necessary to have full mergers, because project collaboration can happen outside the corporate shell. And to that end I think there will be further movement."

But any restructuring, at home or abroad, will not be easy. Arms firms, particularly in France, are suffering huge financial imbalances, he says. "It is difficult to put any sort of value on some of these companies. That does not make for an easy merger or collaboration at the equity level."

And the move towards joint government defence procurement is fine in principle, but difficult in practice. "The danger is that a product is made that the military does not really want because there have been so many compromises. Then you have got to sort out which country will make what. The whole issue is fraught with difficulties."

The motor industry, too, faces consolidation as component makers are forced to serve car makers on a global scale. Sir David expects the industry eventually to be dominated by a few international players. But he is not predicting a sudden revolution. "Like many things in the motor industry, rationalisation has been slow coming. Whether it will happen, I am not totally sure," he says. Nor does he expect GKN to be at the forefront of any changes. The company's drive-line business - making the components that link the wheels to the engine - is number one in the world with a 35 per cent market share. "It is not clear to me with whom GKN would rationalise," he says. "If we were a number three or a number four, then it might be a good idea."

After school at Charterhouse, Sir David trained as an accountant - though he never wanted to be one. His father, a Rear Admiral, did not wish to finance another of his sons through university and the young David Lees saw accountancy as a way into industry. He joined the accountancy firm of Binder Hamlyn in 1962, but grabbed the chance to move to GKN Sankey as chief accountant in 1970. His eventual elevation to the realms of the UK's business establishment remains something of a surprise to him, and colleagues testify to a lack of the naked ambition common to so many executives. "I never ever thought about becoming chief executive of a large company; never thought it could conceivably happen. I have always been someone who has taken steps one at a time, before thinking too much about the next job."

He recalls being summoned to the Bank of England, oblivious that the then Governor, Robin Leigh-Pemberton, was to ask him to join the Court. "I even rang up the Treasury to ask if I had done anything wrong. I really had no idea why I was going."

After eight years as the top man at GKN, Sir David is not stepping aside so he can spend more time with his hobbies: golf (handicap 15), opera, or walking in the hills around his Shropshire home. In July he becomes chairman of Courtaulds, where he is currently a non-executive. Other commitments include being a Fellow of the Royal Society of Arts, and being on the main committee of the CBI.

Sir David was also a member of last year's Greenbury committee on directors' pay, a bruising experience but one he does not regret. The whole question of directors' pay was, he says, "a boil that had to be lanced. There had been some quite celebrated cases where clearly pay and performance were not matched; cases which the corporate sector should not be proud of."

He regrets that Greenbury is only remembered for the row over share options. But the recommendations will have a lasting impact, he believes. "You will now see a lot more disclosure. The biggest single problem of this whole subject is the secrecy that surrounds pay and remuneration."

GKN's annual report, out in a few weeks, would be leading by example: "It will be more open, honest, and out on the table," he promises.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific