GEC-Marconi is dismantling its radio communications factory because of the declining defence market

Guglielmo Marconi will be turning in his grave. The scientist who discovered radio and founded a vast communications empire on it must be watching with dismay as GEC-Marconi is slowly dismantling the radio communications business that Marconi made famous.

GEC-Marconi – run by managing director Peter Gershon – is a wholly owned subsidiary of the defence giant, and is to make 535 redundancies at its radio communications factory at Chelmsford, leaving 1,000 staff. It follows the 400 redundancies decision in radar operations.

The Chelmsford factory manufactures, among other things, tactical radios, the small kit carried by soldiers on foot.

Many of the staff departing GEC-Marconi will be from the manufacturing divisions, but some management will also be included.

The unions were caught completely unawares. They were angry at not being consulted and have made mutterings about industrial action.

GEC-Marconi gives two main reasons for the surprise announcement. First, the catch-all reason of declining defence budgets. GEC-Marconi claims: `It’s a fact of life, defence budgets are shrinking.’

Not only has the market sector shrunk, but competing companies are now larger and more dedicated than GEC-Marconi to the sector.

Racal Electronics, has encountered some similar problems. It recently revealed losses of £4.1m in its radio communications division and is expected to make 1,000 redundancies.

While Racal would prefer to attribute its radio troubles to delays on three specific military projects, all of which will come to fruition in the next few months, the market is not what it used to be.

GEC-Marconi’s second reason for the redundancies is more specific. The company says that radio technology is becoming increasingly dependent on software, but its staff are trained in the old analogue school of manufacturing.

It is trying to retrain its staff in software design, a skill desperately in demand, but, says GEC-Marconi, it is not easy to bridge the divide between making a circuit board and programming a high-tech radio.

The real issue is what presence GEC-Marconi now has in `tactical’ military communications, when faced with bigger players such as Thomson-CSF, Racal and ITT Defence.

The final big contract for radios from the Ministry of Defence is Bowman, the £1.5bn radio deal that will go to a combined consortium, Archer. GEC-Marconi has no manufacturing role since its bid with Thomson-CSF was rejected by the MoD four years ago.

GEC-Marconi has not concentrated its efforts on developing its tactical radios in the way that Thomson or Racal has done.

GEC-Marconi’s radio, Scimitar, appeared later than Racal’s Panther and many believe, despite its landmark order to Turkey 10 years ago, it has never seen the investment needed to keep pace with its rivals, despite the company now being managed by the innovative Italian firm, Marconi SpA.

GEC-Marconi has specialised in strategic radios, which are used by trucks, and devote corporate attention to airborne systems of radar in other parts of the company.

The challenge for Chelmsford is to be able to convert to civilian radio and related telecoms. GEC-Marconi claims it already does, but the question of if this is enough to keep the business going has still to be answered.

By Melanie Tringham