View from City Road: Lucas acquires a heavyweight

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The Independent Online
Shares in British Aerospace rose and those in Lucas Industries fell when it was revealed yesterday that George Simpson, deputy chief executive of BAe and chairman of its Rover cars subsidiary, has finally been persuaded to sign on the dotted line and agree to join Lucas as chief executive next May for a reputed king's ransom.

This share price reaction is not the way most followers of the two companies would assess the news. Mr Simpson is credited with a big overhaul of Rover, and Lucas has been badly in need of a heavyweight chief executive.

Highly as Mr Simpson is regarded, he should not take all the credit for Rover's revamping. Sir Michael Edwardes smashed the dreaded British Leyland unions. Sir Graham Day invented the marketing strategy that has, against all the odds, pushed Rover's image up towards BMW and has led to substantial market share gains in the UK and Europe this year.

Mr Simpson has gone hell for leather for Japanese manufacturing techniques, lowering break-even levels. The upshot is that Rover is heading back into the black for 1993 after two years of losses, while the world's motor industry is leaking copious red ink.

BAe has exercised all its powers of persuasion to keep Mr Simpson. The one thing that might have done the trick - a flotation of Rover in the foreseeable future - is not, it appears, on the cards.

The City is rightly pleased to see Mr Simpson heading for Lucas. Since rumours of his appointment began circulating two months ago Lucas shares have been given an extra lease of life. Already buoyed by mega-merger noises from T&N, at 177p they have more than doubled since the dark days of September 1992, when they slumped to 83p.

Lucas's inbred, self-congratulatory, long-termist attitude has landed it in the soup in the past. Since John Grant joined as finance director last year from Ford an immense dose of financial common sense has been injected.

A belated cost-cutting programme - pounds 60m so far and more to come - and working capital reductions helped to double pre-tax profits to pounds 50.3m in the year to July. Most expect them to rise to pounds 80m this year, enough to cover a 7p dividend. Much remains to be done. But the process is already under way and Mr Simpson will no doubt take the credit for Lucas's recovery.

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