PROSPECTS OF a shake-up in the UK aerospace and defence-electronics sector are growing with the confirmation that Lucas chief executive George Simpson is to succeed Lord Weinstock as managing director at GEC.

Weinstock has ruled the GEC boardroom since 1963 and was largely responsible for building the UK group into a £10 billion ($15 billion) electronics and defence conglomerate. Insiders admit that Weinstock's long-postponed retirement and uncertainties over who would succeed him have left restructuring of the group on hold.

The arrival of Simpson, whose contract at Lucas expires in March 1997, is expected to result in sweeping change at the group. Before joining Lucas two years ago, Simpson had run the Rover car business at British Aerospace until its sale. His imminent arrival at GEC has already rekindled speculation that the group may revive its ambitions to merge with BAe.

Further options for collaboration are now emerging in Europe with the pending privatisation of France's Thomson group and the likelihood of further mergers in the missiles and space sectors.

Sweeping internal changes are also expected within the group. The giant GEC-Marconi business, which covers naval shipbuilding, defence electronics and avionics, has undergone almost continuous restructuring over the past few years, but analysts complain that no firm strategic direction has emerged.

Simpson's move has also raised questions over the future direction of Lucas. The group's aerospace-controls business has been severely cut back during recession, to the point where it now makes up little more than 16% of group sales.

Although Lucas has said that it would look at aerospace acquisitions, it has so far concentrated on developing its core automotive business. The cause of aerospace, now demoted to the status of just another business unit, was not helped, by an embarrassingly large settlement with the US Navy, over contract non-compliance in 1995.

Half-year figures for the group's year to the end of July show that the aerospace unit is beginning to recover, with sales up by 6% to £243 million and profits rising to £13 million. The group acknowledges that it was positioning itself to be "proactive" in the pending consolidation in both automotive and aerospace industries. Analysts believe that could include selling off under-performing units in an attempt to avoid the threat of a hostile bid.

Source: Flight International