The Weinstock years

The Weinstock yearsDavid Manners reviews Stephen Aris’s account of Arnold Weinstock’s career with GEC, which gives insights into Lord Weinstock’s early years in business, how he rose to power at GEC and the legacy he has left the UK in defence and information technology For the current young generation of engineers wondering why Britain has no manufacturing company with global clout in the consumer electronics industry, the computer industry, or the semiconductor industry, Stephen Aris’ book Arnold Weinstock and the Making of GEC (Aurum Press ?19.95) provides illumination. In the late 1960s, the consumer electronics company founded by Weinstock’s father in law – Radio and Allied – took control of three of the UK electrical industry’s biggest companies, GEC, English Electric, and Associated Electrical Industries. The last two mergers were with the encouragement of Socialist Prime Minister Harold Wilson’s Industrial Reorganisation Corporation (IRC). “The opportunity”, writes Aris, “was more or less handed to him [Weinstock] on a plate – courtesy of the Establishment.” The deal maker… Lord Weinstock and Dr Karlheinz Kaske chairman of Siemens, at the time of the successful takeover of bid for Plessey In return for its support, the government wanted “to build a company that could compete on equal terms with the biggest and best in Europe, if not in Japan and the US”, explains Aris and, by 1971, GEC had laid off over 33,500 people in pursuit of that aim. The basics of the combined group looked promising. In 1969, the turnover “approached ?1bn” states Aris. It was the world’s eighth largest electrical company and Europe’s third largest. The IRC’s 1968 report said that GEC’s market shares in the UK were: 90 per cent for locomotives and equipment; 70 per cent for grid switchgear; 50 per cent for turbo-generators; 50 per cent for process control and automation; 50 per cent for defence electronics; 45 per cent for transformers; 40 per cent for smaller switchgear; 40 per cent for electrical machines; 40 per cent for telecommunications; 40 per cent for industrial valves and cathode tubes; 30 per cent for electrical consumer goods. The group’s technology was superb – in communications, computers and radar it was on a par with the best in the world; in process control and instrumentation GEC boasted that it was “the largest automation company in the world”. It had all the ingredients of a world-beater. “The question now was”, Aris writes at the end of chapter four, “would Weinstock and GEC be equal to the challenge offered by the opportunity?”. The remaining six chapters provide the answer. By the time Weinstock retired after 33 years as managing director of GEC, the UK’s main telecommunications company, GEC-Plessey Telecommunications, was 40 per cent owned by Siemens, GEC’s power and locomotive interests were in a French joint venture with Alcatel, the company was out of mainstream semiconductors, out of computers and out of mainstream consumer electronics. Consumer electronics, which had accounted for 20 per cent of GEC’s sales at the beginning of the 70s contributed 2 per cent of earnings at the end. “By the beginning of the 1980s, it was clear that the company had gone ex-growth”, writes Aris who quotes a London Business School study in 1987 which said GEC’s “share price growth, earnings per share growth and sales growth have barely matched inflation”. According to the Financial Times’ 1997 ‘Global 500′ listings, while General Electric of the US has grown to be the world’s most valuable company worth $222bn, GEC was the 210th most valuable company worth $17bn – less than half the worth of Siemens, and much less than Philips’ $29bn. On the last page of the book’s Epilogue, Aris concludes: “the end result was not as magnificent as had been hoped”. Why not? One clue comes from a remark of Lord Francis Tombs, a top GEC manager, and Chairman of the Electricity Council, of Rolls Royce, and of Turner and Newall. “He [Weinstock] is very uncertain and uncomfortable in dealing with technological matters”. Weinstock, with a second in statistics from LSE, had no technological background – but most of GEC’s revenues came from commercialising technology. That may explain Weinstock’s remote management style based on establishing ratios which the GEC operating units had to meet. In 1966, GEC required a sales:capital employed ratio of 2; a sales:inventory ratio of 5; sales per employee of ?4000. Other ratios related to stock turns, costs, debtors, margins, retu.rn on sales, return on equity, return on capital. Geoffery Pattie, Tory minister and GEC-Marconi executive, is quoted as saying about the ill-fated Nimrod project: “This was a ratio driven company. And it was quite clear to me that Weinstock did not know what was going on”. Pattie is also quoted as saying that there existed in GEC “a climate of fear”, an opinion echoed by Derek Jackson, who managed the Nimrod project, who says: “He [Weinstock] somehow engendered a spirit of fear”. Jackson resented Weinstock phoning his home, not telling his wife who he was, and firing questions at her. “To the vast majority of his employees”, writes Aris, “he was a remote and distinctly frightening figure”. Aris, who had access to Weinstock’s memos, writes: “the overwhelming impression one gets from these documents is of a man with an indomitable desire to control”. In one memo Weinstock wrote: “It might be a good idea to remove every other bulb in offices and corridors” (to reduce electricity bills); in another memo, he wrote: “I wish every unit to undertake a monitoring procedure to make regular checks on private [telephone] calls”; another memo told managers to use Dragon computers because they were sold through GEC’s Hotpoint outlets. Another unusual characteristic of GEC was that “nobody took any notice of the main board – basically it never met “, says GEC associate director Ray Wheeler. Arthur Walsh, managing director of Marconi and later chairman of STC, agrees: “At GEC ‘a majority on the board’ just doesn’t apply. It’s a question of whether Arnold wants it or not”. Aris devotes a whole chapter to GEC’s record in microelectronics including the company’s decision, in 1971, to close both Elliott Automation and Marconi-Elliott Microelectronics – into which had been amalgamated the microelectronics operations of AEI, English Electric and GEC. Those closures effectively put the UK out of the volume microelectronics business – at the very outset of the explosive growth (17.5 per cent CAGR for the next 25 years) of the microelectronics industry. Weinstock delivered a UK defence contractor capable – with British Aerospace – of matching the best of the European defence companies. But in Information Technology he did not deliver. One wonders if Harold Wilson’s IRC ever understood the nature of the horse on which it staked so much of the UK’s hopes in IT.
The book is a good read and helps explain why the UK’s electronics industry is as i t is.

Leave a Reply

Your email address will not be published. Required fields are marked *