Magazine article Management Today

Global Imperative at Lucas

Magazine article Management Today

Global Imperative at Lucas

Article excerpt

George Simpson hit the ground running 16 months ago, when he left his dual posts as deputy chief executive of British Aerospace and chairman of Rover group (which he had just sold to BMW) to take over as chief executive of Lucas Industries. There was no leisurely, easing-in to the role for which he had been headhunted. Arriving, fortuitously, at the start of Lucas's annual strategy review, Simpson got straight down to business.

He summoned Lucas's top 100 managers and gave them a tough message. Lucas was recovering from the battering it had taken during the recession, Simpson said, but the pace of revival `must be dramatically accelerated'.

`Without faster change,' Simpson told his audience, `a long-term successful independent Lucas Industries is an unlikely outcome.' Then he personally took command of the group's under-performing motor components division, the key to the group's turnround because it accounts for almost 75% of its 2.5 billion-plus [pounds] annual sales.

Simpson knew that he had no time to lose if Lucas were to avoid being sumded by the rising tide of globalisation and consolidation in the company's motor and aerospace markets. Lucas's margins were, by a mile, worse than any of its British peers. Its financial record since the onset of the Anglo-American recession in 1990 was appalling. Having squandered the 250 million-plus [pounds] proceeds of two rights issues in four years during the second half of the 1980s, the company had only been saved from disaster by obtaining High Court approval to use 90 million [pounds] from its over-funded pension fund to finance essential cost-cutting. Its share price halved from more than 160p to just over 80p late in 1992. Bid speculation drove it back up again, but it was news of Simpson's appointment that sent the shares into orbit. They soared above 220p before settling back around the 200p mark earlier this summer.

Given Lucas's track record, that is still a remarkably elevated rating, discounting - as Charles Burrows, engineering analyst at James Capel, has pointed out - at least two years of profits outperformance. It is effectively a vote of confidence in Simpson's highly regarded abilities. But to grow the share price well beyond this point over the next few years is asking a lot of him. Simpson, 53, will be a very rich man if he can do that. He has a total of almost 1.5 million options in two long-term incentive schemes at prices of 177p and 194p a share. If he can drive profits to a level which pulls the share price up to 3 [pounds], he could make more than 1.7 [pounds] million. But Simpson has already encountered some skeletons in the cupboard.

He has the support of a sound management team, notably Frank Turner - previously with Rolls-Royce - who runs the aerospace division, and John Grant, the former Ford and Jaguar executive who is finance director. Sir Brian Pearse, the former Midland Bank chairman, was a happy choice to succeed Sir Tony Gill, who as executive chairman had dominated the group for almost a decade before his retirement in December. But Simpson, who will soon have to find someone to assume command of the automotive business while he focuses more on the group's strategic development, is the key man. One former colleague at BAe says simply: `George is a great team leader with a sharp financial brain, but he can be as hard as nails if he has to be. That is a rare mixture of qualities.' Simpson's combination of the clinical and the visceral is epitomised by the phrase he favours when giving an under performing manager a last chance.' It is time', Simpson says, `to put your cock on the block.'

When he joined Lucas, the group was in danger of suffering a painful fate. Gill had spent most of the 1980s trying to expunge the `prince of darkness' tag with which Lucas had been stigmatised because of the unreliability of its products - including headlamps - during the 1970s. The Lucas chief was ahead of the game in streamlining Lucas's sprawling range of motor components to focus on higher-added-value areas or businesses where Lucas had an international position. …

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