Vickers plc

views updated

Vickers plc

Vickers House
2 Bessborough Gardens
London SW1V 2JE
(44) 171 828-7777
Fax: (44) 171 331-3964
Web site:

Public Company
Incorporated: 1829 as Nay lor, Hutchinson, Vickers & Company
Employees: 10,381
Sales: UK £1.19 billion (US $1.96 billion) (1997)
Stock Exchanges: London OTC
Ticker Symbols: VKRSY
SICs: 3511 Turbines & Turbine Generator Sets; 3795 Tanks & Tank Components

One of the central figures in British industrial history, Vickers plc of England was reorganized in 1998 to produce an engineering and manufacturing complex capturing leading market shares in three core divisions: Vickers Defense Systems, which produces armaments systems, tanks, and other armored vehicles, including the Challenger 2 tank introduced in 1997; the Sweden-based Kamewa group, which designs and manufactures marine propulsion systems; and Ross Catherall, the brand name under which Vickers operates its turbine components division. Notably absent among this list is the former Vickers Medical Equipment Division, sold in 1997, and the Rolls Royce and Cosworth automotive divisions, sold to Volkswagen to great fanfare in 1998. The company also jettisoned its luxury yacht business, Cantieri Riva.

Vickerss reorganization is proving more than a simple reduction of its activities. In December 1998 the company announced its intention to purchase Norways Ulstein Holding ASA, a leading marine propulsion systems producer. At the same time, Vickers has made moves to remain at the forefront of the rapidly consolidating European defense industry. In January 1999 Vickers and Frances Giat announced plans to enter into a joint venture to produce tanks and other armored vehicles. The joint venture follows upon the closing of one of the two Vickers tank production plants in 1998.

Vickers is led by Chairman Colin Chandler and Chief Executive Officer Paul Buysse. Although the companys revenues of nearly £1.2 billion produced after-tax losses of £2.2 million in 1997, its reorganization is expected to improve its position as early as year-end 1998.

18th-Century Industrial Origins

Edward Vickers was the driving force behind the formation of a new steel production business in Sheffield, the center of early 18th-century British steel production. The Vickers family was already well established in the region at the beginning of the century. While Edward Vickers operated the Vickers familys milling business, his father-in-law, George Naylor, was chief of the Naylor & Sanderson steel and iron production firm, and his brother William entered the steel trade with the operation of a rolling mill. When the Naylor & Sanderson partnership was dissolved in 1829, Edward Vickers stepped in to take over the Naylor side of the business, combining his brothers rolling mill with the companys existing operations, which was now renamed Naylor, Hutchinson, Vickers & Company.

Soon after its formation, the new company bought up a neighboring steel mill. The companys early years were marked by steady growth; by the end of the 1830s the company was already one of the regions leading steel works and the Vickers family was among its leading citizens. The companys expansion would take on greater steam from the 1840s, however, with its introduction into the booming U.S. market. For this, the company enlisted the aid of Ernst Benzon; unlike the founding families, Benzons background was in sales, and he would become responsible for bringing the companys steel and iron products to the United States and other foreign markets. Benzon would quickly become a partner in the company, which changed its name to Vickers Sons & Company in 1867.

A new generation of Vickers already had taken over the companys operation by then. Most significant among the Vickers Sons was Tom Vickers. With a strong engineering background, Tom Vickers, who joined the company at the age of 22, would be responsible for developing the steel companys engineering sideto the extent that the company would soon become known more for its products, which included steel tires, propellers, shafts, and other components but also would extend into shipbuilding and armaments before the end of the century, than for its steel production. An important Vickers product of the era was its armor plating, necessary for protecting the British fleet from the increasing hitting power of the modern gun.

Vickerss decision to enter fully into the armaments industry was taken in 1888, when the company accepted a government commission to manufacture entire gun assemblies, not merely their components. From armaments, the company quickly expanded into shipbuilding, becoming the first private British firm to produce complete marine defense solutions. By the turn of the century Vickers had established itself as one of the British Empiresand the worldsleading military suppliers. The company had made two important purchases to achieve this rapid growth. The first came with the purchase, in 1888, of the Naval Construction & Armaments Company Limited. Barrow, the shipbuilders location, would soon become synonymous with Vickers, and function as the site of many Vickers engineering triumphs. Vickers quickly built out the Barrow yards. From an initial employee count of less than 900, the Barrow yards reached more than 5,000 by 1897, producing the Royal Navys destroyers, cruisers, and other battleships on nearly 300 acres of dockyards.

A second important acquisition followed at the end of the 1890s, with the purchase of Maxim Nordenfelts, maker of the Maxim machine gun, which had played an important role in the Boer War and would remain a key component of the British armed forces entering World War I. The addition of Maxim gave the company a new name for the start of the new century: Vickers Sons and Maxim Ltd.

Weathering the World Wars

Vickerss importance to the British armed forces effort extended beyond its manufacturing and into its engineering endeavors. The company would continue to develop stronger armor plating and big guns for its battleships, while on the offense the companys products would extend to include submarines, torpedos, the invention of the first battle-ready tanks, and moves into the new heavier-than-aircraft industry, with both tanks and aircraft often powered by Rolls Royce engines. At the outbreak of the First World War, Vickers would prove its strategic importance to the English cause, drastically increasing production and enabling the country to hold the line until the late American arrival to win the war.

On the civilian side, Vickers also had entered the automobile business, forming the Wolseley Tool and Motor Car Company Limited in 1901. Although much of the companys expansion in the first decades of the century would be directed toward its armaments businesses, including acquisitions that brought the company fire control systems production capacity, among others, the period following the War to End All Wars would see the company attempt the difficult adjustment to a civilian market.

Vickers turned to an obvious market, that of converting its warship production to merchant shipbuilding production. But the company quickly sought opportunities in a vast number of new products and industries, including optical instruments; bicycles; machines; tools; engine manufacturing; production for the railroad industry, including the manufacture of locomotives; sporting guns; sewing machines; furniture; and many others. The company also would attempt to rival the Ford motor cars with its own inexpensive, mass-produced automobile. Its most significant move of the time, however, was the acquisition of the Metropolitan Company, a leading railroad cars manufacturer and electrical power supplier; the purchase, for the price of nearly 13 million pounds, created the Metropolitan-Vickers Electrical Company in 1919.

The British economy soon would enter into a grand slump that would last through much of the decade and see an important transformation of Vickers. While Vickers struggled through the economic recession, its long-time rival, Armstrong Whitworth, the nations leading defense industry manufacturer, was heading toward collapse. The situation reached a head in 1926, when the Vickers and Armstrong operations were merged into a new company. Former subsidiary operations, which by then included the Metropolitan-Vickers Electrical Company and the International Paper Company, among other diverse interests, were shed. Vickers regrouped around a core defense industries focus; for its steel-making interests, it created a new company, the English Steel Corporation.

The buildup to the Second World War would give the newly expanded Vickers a boost. While the companys shipbuilding division geared up to an important series of orders, not only for its battleships and cruisers, but as well for its submarines, another Vickers product family was finding strong demand. Vickers aircraft had already played a strong role in World War I. At the end of that war, the company introduced its Vimy, which made international headlines by being the first plane to cross the Atlantic in a single direct flight. The Vimy, originally designed as a bomber, was quickly adapted to civilian needs, becoming among the first passenger-oriented airliners. The company continued to lead the British aircraft industry into the 1930s, when production began on the landmark Spitfire. Over the next decade, Vickers would produce nearly 22,000 Spitfires. The Spitfire, joined by the Wellington bomber, of which more than 11,000 were built, was credited with helping England resistand then turn the tideof the Nazi war effort.

Indeed, Vickers production was devoted entirely to armaments during the years of the Second World War, producing not only tanks and other armored vehicles, battleships, and aircraft, but guns and munitions as well. By the end of the war, Vickers had produced some 225 ships, including eight aircraft carriers and 123 submarines. Its tank production numbered in the tens of thousands, and the company alone provided for some two-thirds of the countrys light artillery needs.

Postwar Adjustments

While the rest of the United Kingdom was celebrating the Allied victory, Vickers was forced to look hard at its postwar prospects. Despite government reassurance of a gradual slowdown in armaments orders (contrasted with the sharp breakoff of orders at the end of the First World War), Vickers would still be required to develop new markets for the peacetime economy. The new conditions forced Vickers to redefine itself.

In the immediate postwar period, Vickers identified four main areas for its business: aircraft; shipbuilding, including submarines; steel production; and engineering. The companys aircraft production would make a number of important advances, including the 1950s introduction of the Viscount turbo-prop jet plane. In shipbuilding, Vickers would become the first builder of a British nuclear-powered submarine. The companys engineering efforts would once again take it into the diversified manufacturing field, as the Vickers name became associated with products ranging from sewing machines and copiers, none of which provided the hoped-for success. A particularly flagrant failure was Vickerss attempt to move into the production of tractors. With the postwar economy booming, the company saw a vast market for its tractors, both in the United Kingdom and throughout the world. But the companys tank building experience did not translate well to the tractor market, which required far simpler systems than the company was accustomed to building. The tractor project would remain a stone of the companys books for more than a decade, before being ended finally in the 1960s.

Different difficulties were in store for Vickerss steel production arm. The rise of the Labor Party to government control in the 1950s meant the fulfillment of Labors promise to nationalize a number of strategic industries, including the coal and gas industries, but also the steel industry. The government took control of Vickerss steel division at the beginning of the 1950s; the return of the Conservatives to the government leadership in 1954 would put the former Vickers steel works on the auction block. Vickers hastened to buy back its former division, paying a handsome price for the privilege. Control of steel production would only last as long as the next Labor Party nationalization effort, conducted in the 1960s, which saw the definitive end of Vickerss steel production activity in mid-decade.

After ending its tractor production in the early 1960s, Vickers had moved to step up its production of copy machines, acquiring a number of British-based businesses. Yet the company found it difficult to compete against industry leaders such as Xerox. A more successful diversification came from the companys move into medical instruments, which would remain a Vickers division until the late 1990s.

As Vickers struggled to redefine itself during the 1970s, the company was hit once again by British government policies. In 1977 both the companys aerospace (which by then included a partnership role in the Concorde project) and shipbuilding divisions were taken over by the government. The losses of these two core divisions cut out more than one-half of Vickerss revenues and more than two-thirds of its annual profits. The amputated operation was forced to look elsewhere for boosting its business.

Redefining for the 1990s

A partial answer came in 1980, when Vickers agreed to acquire Rolls Royce Motors. Long a supplier of engines for Vickerss tanks and aircraft, Rolls Royce had reached the verge of financial collapse at the end of the 1970s. As part of the acquisition, former Rolls Royce CEO David Plastow was placed in the Vickers lead. Plastow would take Vickers on an extensive restructuring through the 1980s, drastically streamlining the companys operations. After eliminating nearly half of the companys more than 50 subsidiaries, including many of its noncore activities, the company began to refocus on building several strategic markets, including boosting its medical instruments division and purchasing Kamewa, the Sweden-based world leader in propeller and other naval propulsion systems. The 1986 Kamewa purchase was followed in 1987 by the purchase of the Leeds tank production plant of the Royal Ordnance department; added to Vickerss existing tank production facilities, the purchase established Vickers as the countrys leading producer of tanks and armored vehicles.

Colin Chandler replaced Plastow as director and then CEO of Vickers in the early 1990s. By then the company was struggling through a new global recession that had hit most of its divisions. The companys tank production would be bolstered by the British armys order of 130 Challenger 2 tanksthat order would eventually be increased to nearly 400 of this latest Vickers design, a contract worth more than £1.3 billion. The first of the Challenger 2 tanks were turned over to the British army in 1998. Yet the company was still searching for future orders from other governments, casting the profitability of the venture in doubt. With few orders on its books, Vickers decided to close its Leeds tanks factory in 1998. By then, Vickers had lost its title of largest British armored vehicle makerwhich went to the merged operations of Alvis PLC and GKN PLC in 1998. In response to this merger, and to the increasing consolidation of the European defense industry, Vickers reached a joint venture agreement to product tanks and other armored vehicles with Frances Giat, maker of the Leclerc tank.

In 1998 Vickers, now under the leadership of CEO Paul Buysse, made international headlines with the sale of its Rolls Royce division. Rolls Royce had been struggling throughout the 1990s, with the worldwide recession and Persian Gulf War cutting deeply into demand for the divisions luxury vehicles; the Asian economic collapse of the late 1990s would further increase the divisions difficulties. Added to this, Rolls Royce, which had not introduced a new model in nearly 20 years, was hard pressed to find these development resources. In the mid-1990s the division slashed its work force and reorganized its production methods. The company also began work on the latest Rolls Royce model, the Silver Seraph, introduced in 1998. Nonetheless, Vickers began looking to shed the luxury division. Initial suitors for the prestigious luxury name had included BMW and Mercedes Benz, but the Rolls Royce Motors division finally would go to Volkswagen, which also added Vickers Cosworth racing engines subsidiary under its Audi subsidiary.

The Rolls Royce sale had followed on the sale of another long-time Vickers division, its medical equipment arm. Another division to go was the companys Cantieri Riva luxury yacht and powerboat operations. Meanwhile, Vickers regrouped around three core divisions: Vickers Defense Systems, including tank production; turbine engine components, produced especially by the companys Ross Catherall subsidiary; and propulsion technologies, which included its Kamewa subsidiaries and the 1998 acquisition of the complementary activities of Ulstein Holding. The new Vickers, while maintaining a foothold in the companys tradition, seemed to have successfully bridged the transition to the next 150 years of Vickers history.

Principal Subsidiaries

Brown Brothers & Company Ltd; Michell Bearings; Turbine Components Division; Specialist Engines; Ross Catherall Ceramics Ltd; Ross & Catherall Ltd; Trucast Ltd; Vickers Aerospace Components; Vickers Airmotive; Vickers Bridging; Vickers Defence Systems; Vickers Precision Machining; Vickers Pressings; Vickers Properties Ltd; Aquamaster-Rauma Ltd; Kamewa Benelux Bv; Kamewa Hagglunds; Kamewa Italia S.R.L.; Kamewa Sari; Mst Marine Schiffstechnik Gmbh; Mst Marine Schiffstechnik Gmbh; Ff-Jet Ltd; Kamewa Ab; Kamewa Denmark A/S; Kamewa Finland Oy; Certified Alloy Products Inc.; Kamewa Canada Inc.; Kamewa USA Inc.; Trucast Inc. Kamewa Australia Pty Ltd; Kamewa Hong Kong; Kamewa Korea Co. Ltd; Kamewa Singapore Pte Ltd; Kamewa Japan Kk.

Further Reading

Evans, Harold, Vickers: Against the Odds, London: Hodder and Stoughton, 1978.

Scott, J.D., Vickers: A History, London: Weidenfeld and Nicolson, 1962.

M. L. Cohen