It has been a turbulent few months for Vickers chairman Sir Colin Chandler. After long-running manoeuvres and wrangling between the suitors for Rolls-Royce, the luxury car maker has finally been sold.
He can now watch from a safe distance as Rolls-Royce and Bentley go their separate ways. The luxury car business almost brought Vickers to its knees in 1992 when sales slumped in the recession. With the company now sold to Volkswagen for £430m, the proceeds will give Vickers a chance to revive.
This sale, the earlier disposal of Vickers’ medical businesses and the more recent sale of Cosworth Engineering to VW netted £275m in cash after tax and return of capital to shareholders.
‘We made the decision to divest from Vickers those businesses with the potential to draw us down a bit,’ Chandler explains.
‘The key issue was timing. In the case of the medical businesses and Rolls-Royce we ran the risk of waiting too long. And as we said to VW, they can provide a larger home for Cosworth, for which we quadrupled turnover.’
The consolidation process has continued with the sale last week of Italian luxury yacht maker Cantieri Riva for about £4m to Stellican, the London-based investment firm headed by Stephen Julius. Riva was bought 10 years ago to complement Rolls- Royce and had become surplus to requirements.
The next sale will be of marine stabiliser and steering gear supplier Brown Brothers. Vosper Thornycroft is among the potential buyers.
The disposals have been part of a strategy to focus Vickers on three core areas defence, marine propulsion technology and turbine components.
On defence, Vickers will be stepping up its search for international partners following its failure to win the Multi-Role Armoured Vehicle contract against GKN.
Vickers has spotted an opportunity to offer marine propulsion systems as a complete package. This would include not only waterjets, in which its Kamewa subsidiary specialises, but also pumps, gearing and electrical equipment.
‘We could go beyond waterjets to other parts to get a whole propulsion system,’ Chandler says. ‘Kamewa is a world leader in this business and this is a consolidating industry. We think there are ways of expanding the business through acquisitions, alliances and joint ventures.’ Such deals look most likely in the US and the Far East.
The turbine component division, another part of Vickers’ core, is ‘a good, solid business,’ Chandler says, though this sector is not yet ripe for further acquisitions.
But the defence sector offers great possibilities. The Challenger II production lines will be kept busy until about the end of 2000, following a 30-month headache when the army refused to take delivery until Vickers fixed problems with the tank and its manufacture.
There are also export opportunities: Challenger IIE has been selected by Qatar, although a contract, understood to be for a possible 40 tanks worth about £250m, has been delayed.
Other tank export targets are Greece and South Africa, both expected to make decisions next year.
In two years’ time, Vickers expects to benefit from its contribution to the Tracer armoured reconnaissance vehicle project. It is part of a development team led by Lockheed Martin and British Aerospace.
Despite Vickers’ failure to win the Multi-Role Armoured Vehicle, Chandler says there are still options for defence expansion. Vickers could even make a major defence acquisition in the UK ‘if the value was right’, he adds. To most observers, this is a heavy hint that Vickers could eventually make a play for GKN.
As part of the restructuring strategy, Chandler also seems prepared for compromise with potential European partners. ‘The British defence industry environment differs from France and Germany with their more dirigiste tendencies,’ he says. He believes that if a giant, consolidated European armoured vehicles company were to work, an economic interest group arrangement of the kind used to manage Airbus might be a more preferable ‘immediate solution’ than a single limited liability company.
While suggesting that a link with French tank maker Giat might be established, he is reticent about identifying other possible future foreign partners.
Chandler now has a more strategic role as Vickers’ chairman, having given up the managing directorship to Belgian BTR veteran Paul Buysse. ‘I liked the chemistry between the two of us,’ Chandler says.
The day-to-day task of improving the way Vickers works will now fall to Buysse, who is completing a review of the company’s operations. This leaves Chandler to look after acquisitions and the formation of overseas alliances.
Chandler aims to retire from full-time work with Vickers in October 1999. Running the company has been a tough challenge, especially during Rolls-Royce’s times of trouble.
But since then, he says: ‘We’ve put a lot of investment into the company, and a lot of investment into manufacturing development.’
The result, via restructuring and some carefully planned disposals, will be a more focused, leaner business, Chandler hopes.
Sir Colin Chandler at a glance
Education: Left school in Blackheath at 16
First job: Apprentice at De Havilland
Key appointment: Head of Defence Export Sales Organisation 1985-1989
Current job: Chairman of Vickers plc
Interests: Tennis, rugby, opera, ballet