CITY AND SUBURBAN

A coup that puts a price of £7 billion on Arnold Weinstock's head

CHRISTOPHER FILDES

The most powerful British industrialist of our time now faces a coup d'etat. The assaults being mounted on the General Electric Company are directed at Lord Weinstock personally, and could only be so, for GEC is the corporate monolith which he created in his own image 20 years ago and has dominated ever since.

That can be seen most clearly in the scheme put forward by Lazards on behalf of Plessey. At the end of it, after £7 billion worth of shares had been passed over, and outlying parts of GEC had found new owners, its core businesses would belong to the existing GEC shareholders. The differ- ence would be that the formidable Sir John Cuckney would have replaced the man who is GEC's managing director.

Arnold Weinstock has never bothered to be chairman. That has been a post for a political front-man — Lord Aldington, Lord Carrington, Lord Prior — or a sop to offer in negotiation — to Lord Nelson of Stafford, who agreed to merge English Electric into GEC, and became chairman of the combined company, for a while. No one doubted, then or later, who was in charge.

He is a potent combination of opposites — the meritocratic son-in-law, the electric- al engineer who was not trained in en- gineering or electricity and as a matter of Principle stays away from factories, the multi-millionaire who was Labour's favourite businessman but never Mrs Thatcher's, the takeover merchant backed by Anthony Wedgwood Benn.

Statistics, estate agency, and a spell in the Admiralty were his background when he married Michael Sobell's daughter and with him built up Radio & Allied, to profits which its bigger competitors could only envy. The three giant companies whose motto was 'everything electrical' GEC, AEI, English Electric — were find- ing life harder as the days of comfortable cartels and easy orders began to fade.

Within eight years, from 1961 to 1969, Weinstock took over all the Big Three and rolled them into one. First, GEC bought Radio & Allied on terms which left Wein- stock and Sobell as GEC's largest share- holders. Management control followed, then the hotly contested bid for AEI, then English Electric — which was terrified, ironically enough, of being taken over by Plessey. It fitted the corporatist fashions of the 1960s — big companies and big govern- ment working together — and it set a style for a whole generation of British mana- gers.

They learned from Weinstock to scrap their huge head offices and elaborate corporate structures. They tried to dele- gate management, but to keep it on a tight financial rein, and to hold on to every penny of cash. They measured their achievement not by prestige but by profit.

Now, by that measurement, GEC and Lord Weinstock are under pressure. The profit and loss account has been going nowhere for years. So have the shares, and so, say its critics, has the company.

Some attack it for failing the test, prop- osed (in City and Suburban) by Ross Harvey as the right way to judge a busi- ness: do the things it makes work? Air- borne warning systems, weapon control systems, torpedos, telephone exchanges, locomotive engines, automatic light rail- way systems over-sensitive to rain and to metallic wrappings from chocolates — one after another they have fallen down on the Harvey test, and GEC's reputation has fallen with them. Others fault GEC for missing the bull market of the 1980s wrapping up its talents, like the man in the parable, and burying them in the bank. I have always sympathised with that man, who would often have been right, but he was sternly rebuked, and now GEC knows the feeling.

Others again sense a loss of ground on the unmarked frontier between politics and economics. When the Prime Minister runs Lord Weinstock down in favour of some slippery shopkeepers, that is more to his credit than to hers, but it is a sign of changed times, with corporatism out of favour. GEC's political chairmen have all been Heathmen. It has been concerned to work with government and supply the public sector, and that sector has shrunk or (as with defence purchasing) been told to simulate private-sector methods.

Others look to the succession. GEC had a flirtation with Alan Sugar of Amstrad, but nothing came of it. The agreeable and Honourable Simon Weinstock is on the main board and is suspected of being an electrical Rocco Forte.

These anxieties had by last year sug- gested to the City and the international electrical industry that GEC was no longer fireproof. When GEC formed an alliance with Siemens to renew a bid for Plessey, its old adversary, Plessey's advisers at Lazards decided that the best form of defence was counter-attack. Their present plan is for a purpose-built company to offer its shares for GEC's, backed by a huge credit from Barclays Bank.

Barclays protests that this is just an ordinary banking transaction with some noughts on the end, that it likes to help customers whose principal bank it is (Ples- sey is one, GEC is not), and that it runs little risk, since the deal Lazards proposes would finance itself and leave the new company with no borrowings. My instinct is that if Barclays is prepared to go this far to back a bid, it is bad news for the company on the receiving end.

Battle is now joined on every front financial, industrial, political, domestic, European, transatlantic. Here is another fierce test for merger policies, both the London and the Brussels varieties. The public interest is so plainly involved that Lord Young should ask the Monopolies Commission to report on it — if, that is, he can find commissioners with a better sense of commercial reality than the bunch of quangocrats, trade unionists and academics who wrote the abysmal report on British Petroleum.

The lessons that matter are already clear. The first is the danger of remaking a whole industry in one mortal manager's image. The next is the incapacity of the big shareholding institutions — unhappy with GEC for years, but too scared to take Lord Weinstock on. Just as with Distillers, they waited for a bidder to come along and do their work for them. That is a delayed and drastic cure for problems of management and direction, and (as we saw) not always the right cure.

Management and direction are at the heart of the argument. Who is going to run these businesses? Men in their sixties and seventies, like Lord Weinstock, Sir John Clark of Plessey, Sir John Cuckney, Lord King? I do not believe it. The man we need is the next Arnold Weinstock, and I wish I could see him coming over the horizon.