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August 1, 1988

GEC REORGANISES INTO EIGHT UNITS AHEAD OF POSSIBLE DEMERGERS

By CBR Staff Writer

The government put legislation on the statute book that removed the onerous tax disincentives to demerging subsidiaries expressly because GEC Plc’s Lord Weinstock had asked for them – or that’s how the story goes, anyway. Yet while there have been substantial numbers of demergers and divestments into new quoted vehicles since the rules made it easier – and the biggest of all, the flotation of Racal Telecommunications Group Plc by its parent, is just round the corner – one major company that has very definitely not availed itself of the opportunity is none other than Lord Weinstock’s GEC. That could be about to change however with the announcement late last week that the company was to be reorganised into eight main business groups, substantially the largest of which will be GEC Marconi. The group, bringing together the defence and professional electronics interests of GEC, will have 47,000 employees and turnover of some UKP1,900m which will come as something of a surprise to those who think of GEC as much bigger than the likes of Plessey Co, Racal Electronics Plc and STC Plc in the areas in which all four companies are players: STC Plc is actually bigger than Marconi, and the other two are not too far behind, one reason being that GEC has not exactly recorded a soaraway growth rate over the past few years. The businesses that are going into the new group include Marconi Command & Control Systems; Marconi Radar Systems; Marconi Communications Systems; Marconi Defence Systems; Marconi Space Systems; Marconi Underwater Systems; GEC Avionics; and GEC Sensors.

Sales per employee The other major element in the shake-up is the GEC Power Systems unit, which groups the company’s electricity generation and electrical engieering interests, and has annual sales of some UKP1,200m, with 30,000 employees – and hopes to get into private power generation. It is noteworthy that sales per employee in each case work out at UKP40,000 – $80,000 – which is on a par with the mass of US and European companies in the electronics sector, but well below the best, like Nixdorf Computer AG, which reckon that $100,000 per employee is the target at which to aim. The Consumer and Medical groups will each remain unchanged disappointingly, the efforts of GEC and Philips NV to put their medical electronics interests into a joint company that could stare the likes of Siemens AG, GE Co Inc and Toshiba Corp in the face came to nought. Few details are given of the other six units, but the W & T Avery weighing machines and Gilbarco petrol pump equipment acquisitions will be put together into a new electronic metrology division, and the other two groups will be components, and office equipment and printing – the latter being mainly the A B Dick acquisition in Chicago, which seems to be scarcely visible in the office field these days, but has a fine line in ink-jet printers for applications like date-stamping food. Deputy managing director Malcolm Bates acknowledges that demergers are still on the agenda – perhaps the most excitement would be generated by flotation of a minority in Marconi – saying that the new corporate structure will give GEC maximum flexibility should it wish to consider demerging any interests in the future. It doesn’t expect to make any lay-offs as a direct result of the reorganisation.

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