The Industrial Reorganisation Corporation, formed in 1966, was appointed marriage broker. ICL, British Leyland and the bearings group RHP were among those to emerge from its doors: they were all commercial disasters for many years thereafter. But one IRC-encouraged agglomeration does stand out as a success. In 1967 and 1968, the General Electric Company bought Associated Electrical Industries and English Electric, creating an electrical and electronics giant.
Since then, GEC has steadily increased its influence. And if its bid for VSEL is successful, it will have unchallenged domination of the British defence industry. That will make Arnold Weinstock, who assembled the group in the 1960s, overweaningly the most powerful industrial figure in Britain - the Rupert Murdoch of manufacturing.
Lord Weinstock, 70, is the brooding presence of British industry. He sits in his vast and gloomy office in Mayfair, using his elaborate telephone system to cross-examine managers on the minutest detail of their operations. He asks advice only of a handful of close directors. And he has a frighteningly precise mind - on Desert Island Discs he decided the only way of bringing order to his selections would be to choose music conducted by one man.
Is he, though, a good thing for Britain? Has he been a bracing and professional influence in a morass of mediocrity, or is there perhaps a correlation between his stewardship of Britain's hi-tech sector and the country's limp industrial performance?
These are questions Weinstock and his confidants discuss among themselves. They do not have the certainty of Lord Hanson - with whose style they share a good deal - that earnings per share are the be-all and end-all. They know they are open to criticism, and worry about it.
Not that they can be complacent about GEC's share price. It outperformed the market during the 1970s but has lagged since 1987: it is, investors complain, worthy but dull. The phrase "cash pile" sticks to GEC as a leech does to a juicy limb: Weinstock has pounds 1.35bn in his till. Although it was around pounds 2bn at one time, he has so far seemed unable to spend the bulk of it. If he does capture VSEL, the City will throw its hat in the air.
Share price aside, GEC's financial performance has been solid. It has stayed in the black for three decades and has swept through three deep recessions with hardly a blip - there have been plenty of job losses, but as part of planned rationalisations, not panic measures.
No one can accuse GEC of unprofessional management. Unlike the managers at British Leyland, RHP or the other IRC monsters, Weinstock understood the importance of controlling costs. He started demanding monthly financial reports from his managing directors in the 1960s, which meant he could see immediately if the ratios were going awry. Between 1969 and 1974, a period of growth for GEC, the workforce was cut by 20,000, or 10 per cent. In other words, Weinstock started running his company professionally 15 or 20 years before the rest of British industry. Only a brace of numbers- driven conglomerates - Hanson and BTR - could claim the same.
All of which means that the path that GEC followed was a deliberate one - decided by Weinstock and followed without external pressure to deviate from it. Its growth has been snail-like compared with rivals overseas. It was a path that took GEC from 19th position in the Fortune ranking of non-US companies by turnover in 1969 to 157th in 1993. GEC says that does not matter. Others disagree.
GEC grew up before the Second World War as the empire of one man, Hugo Hurst, and by 1939 employed 40,000 people in light engineering, power generation, radio and television. After Hurst's death in 1943, it continued to move into new areas - nuclear energy, semiconductors and computers.
In 1961, GEC took over Radio and Allied Industries, a company controlled by Michael Sobell and run by his nephew, Arnold Weinstock. Soon Weinstock was in charge of GEC and was laying into its complacent habits. He cut the headquarters staff from 2,000 to 100, and imposed austere financial control. That made him the obvious runner for the IRC to back when it wanted to bring together the three electrical groups. They may have been large by British standards, but they were already dwarfed by the likes of Germany's Siemens - its turnover was almost as big as that of AEI, GEC and English Electric put together.
Weinstock was now custodian of much of Britain's hi-tech capability. He also had a virtual monopoly on the electrical widgets that could be found in every factory: motors, relays, controls of every sort - "the whole spectrum of industrial automation," according to one senior electrical engineer.
Here is one reason why GEC is no longer a giant. As soon as it could, it stopped making these widgets. For that, electrical engineers excoriate it. "The general opinion among my profession is that GEC has run down Britain's electrical industry," the same engineer says. "It was not as though it was competing with low-wage countries - these products are made in highly automated factories." He points out that in the United States the engineering giant Allen-Bradley uses the most sophisticated manufacturing techniques to make basic products. GEC prefers to point to another example. "Look at Philips," it says. "It stuck to widgets andnearly went broke as a result."
This highlights Weinstock's prime characteristic - deep caution. He pulled back from any area where the risk/reward ratio was anything less than delightful. GEC kept a delicate foot in consumer electronics, with Hotpoint and Xpelair - but made no attempt to jack up production as consumer demand boomed. Britain's balance of trade in washing machines went from a pounds 70m surplus in 1970 to a pounds 150m deficit in 1985 - the invaders were not Japanese or Korean, but Italian and German.
If in abandoning these products, GEC moved into areas that created more jobs and more wealth than it would otherwise have done, it cannot be criticised. This is a tricky one to measure, but sheer size is a useful yardstick. The list of the world's 40 biggest corporations includes several in electrical and electronic engineering: Hitachi, Matsushita Electric, General Electric of the US, Siemens, Sony, NEC, Philips, Mitsubishi Electric, ABB Asea Brown Boveri, Alcatel Alsthom. Where is GEC? One hundred and fifty-seventh. Excluding US companies, it still comes in at number 108.
GEC is aware of these figures, and has regular tussles with Fortune over their validity (if the figures for joint ventures are added, GEC gets to about number 90). But it does not deny that Siemens, a company whose size it matched in the late 1960s, is now several times bigger. According to the Fortune Global 500, GEC's turnover in 1993 was $9.4bn (pounds 6.3bn), while Siemens's was $50.3bn (pounds 33.6bn). Now Siemens is an unwieldy and overmanned creature - but its research and development expenditure alone is almost 60 per cent of GEC's total sales. It employs 391,000, against GEC's 93,000. It is hard to avoid the conclusion that Siemens is doing more for the German economy - in terms of technology, jobs, wealth creation - than GEC is for the UK.
Weinstock implicitly acknowledged that size mattered by assembling a series of joint ventures in the late 1980s. Power generation is now in the hands of GEC-Alsthom, consumer electronics is shared with General Electric of the US, while the telecoms operation GPT is partly owned by Siemens.
So what did Weinstock do with the array of high technology he controlled by 1970? He ran hard with two sectors - power generation and defence - and ignored most of the rest.
In the late 1960s, power generation was still firmly in government hands: an established player could be sure to be given a share of what was then a fast-growing market. GEC invested, and built up a powerful presence. When the UK market dried up, it was able to switch successfully to overseas markets. It understood how to do business with governments, and Weinstock made canny use of his contacts - Lord Prior, the former Cabinet minister, became GEC's chairman, while a former under-secretary at the Department of Trade and Industry became his export director.
The area that really appealed to Weinstock's conservatism was defence. Here was an area where Whitehall's "cost-plus" method of pricing meant it was impossible not to make a profit, and where the government would finance much of the necessary research. GEC-Marconi became the core, developing sophisticated radar, weapons control and other electronic systems.
Life has become much tougher for defence contractors in the last decade. First, the Tories demanded better value for money and more competition; then the Cold War ended. A few years ago, it looked as though GEC was casting around for ways to turn swords into ploughshares - Marconi was looking at civilian applications for its wireless technology, for example. But GEC has few skills in mass marketing, and the VSEL bid suggests that Weinstock has changed his mind. The defence cake may have shrunk, but if GEC can grab a big enough share of it, it is more enticing than ever. The Government has abandoned its insistence on national competition, and seems to want a single national champion to take on foreign competition. Weinstock is content to be that champion.
GEC has come under fire from other quarters. In the old cost-plus days, it was seen as a drain on the taxpayer when its programmes overran (the most notorious was the airborne early-warning aircraft, cancelled when it was five years late). It is a bete noire among its own suppliers, who consider it one of the worst in the late-payers league.
But its real sin is one of omission. GEC could surely have stayed in the top division, riding the wave as demand for computers, consumer electronics and electronic devices of every sort exploded. It had the technology and management skills. It could have done so much more for the economy. It is a shame it did not.Reuse content