Search results

Abstract only
Volume 3 Management, mergers and fraud 1987–1993
Author: John Wilson

The final volume of this detailed history of Ferranti covers the last seven years of its operating existence, starting with the 1987 merger with ISC and culminating in a humiliating demise consequent upon GEC’s 1993 decision to withdraw its bid for what by then was an unprofitable rump. Extensive attention is paid to the way in which ISC evolved under James Guerin’s stewardship, providing insights into the shady world of international covert arms dealing. While in 1987 Ferranti purchased what was regarded as a highly profitable defence electronics business, by 1989 it was apparent that ISC’s net worth was marginal, creating an accounting hole in what by then was Ferranti International from which it never recovered, in spite of highly imaginative strategies enacted by a new chief executive, Eugene Anderson. The book provides detailed insights into international mergers, corporate governance issues and defence electronics that highlight the dangers associated with competing in one of the fastest-moving industries of that era.

John Wilson

had spawned a host of successful products listed in Appendix H of Volume 2, the bulk of which had been capable of generating sound profitability well into the 1980s. On the other hand, most Ferranti personnel would also attribute a lot of the successes achieved during the late 1970s and early 1980s to the management team assembled by Derek Alun-Jones, the managing director brought in by Sir Don Ryder after the firm was controlled and mostly owned by the state from 1975. Similarly, the government was also pleased with this team, because having invested £8.5 million

in Ferranti: A History
John Wilson

are at no stage claiming that Ferranti executives were guilty of perpetrating a fraud on their shareholders, serious questions must be asked about the quality of information accumulated and the way it was utilised. One dimension to all this was the prevailing attitudes towards corporate governance, in that the board, and in particular Derek Alun-Jones as chief executive, would appear to have taken decisions without the need to take into consideration the interests of other stakeholders. At the same time, it is necessary to assess the environment in which the board

in Ferranti: A History
Abstract only
John Wilson

totalling £660 million in October 1989 was only going to add substantially to the financial burden. On top of these difficulties, there was also an emerging credibility gap, in that both customers and suppliers proved far less willing to trust Ferranti International. This credibility gap was felt especially by Sir Derek Alun-Jones, because as the chief executive of the firm that had entered into the merger, not to mention being executive chairmen of the joint enterprise, there were many demands for his resignation. To his considerable credit, while agreeing that he should

in Ferranti: A History
John Wilson

corporate story, and especially how Sir Derek Alun-Jones’ successor, Eugene Anderson, tried to forge a ‘New Ferranti International’.3 The key to understanding this radical new approach was Anderson’s desire to centralise decision-making as far as possible, especially in financial terms, providing an enormous contrast with the highly decentralised nature of the firm under both the de Ferranti family and Sir Derek. Even though in 1975 the latter had introduced financial planning techniques to the way Ferranti was managed, it was always accepted by the powerful divisional

in Ferranti: A History
John Wilson

mounting problems in a range of activities that would be enormously exacerbated by the Guerin fraud. Separating the two dimensions in this way allows a better understanding of the fraud, because just as with our analysis of the reasons why Derek Alun-Jones led his board into this merger, it is vitally important to differentiate between the objective facts of the situation and any subjective views based on hindsight or specific vested interests. Moreover, with such a mountain of data verified by some of the City’s most prestigious firms it was by no means apparent that

in Ferranti: A History
Abstract only
John Wilson

first issues to discuss in this respect is the asset disposal programme, and specifically the early loss of the most profitable component of the Ferranti group since the 1950s, FDSL. One can only hypothesise about what would have happened had the MoD not forced Sir Derek Alun-Jones to –200 –400 Figure 8.2 Ferranti International financial performance, 1989–93 (£ m) DEMISE AND EPILOGUE 263 sell this ‘jewel in the crown’, because having secured the £2 billion contract to supply the onboard radar for the EFA, GEC was assured of a highly profitable business that has

in Ferranti: A History
John Wilson

persuade his fellowdirectors that there was no substance behind the Grand Jury investigations, placing on record a false statement that ISC had never sold military systems to South Africa,4 by February 1989 Ball had persuaded Sir Derek Alun-Jones to make it official corporate policy that the firm would never trade with this embargoed country. Needless to say, though, as Guerin and Ivy continued to INVESTIGATIONS AND COURT CASES 143 work with South African subcontractors on various missile programmes, the ISC chief executive completely ignored this ruling, providing

in Ferranti: A History
Abstract only
John Wilson

the special products division, the nature and pervasiveness of Guerin’s financial manipulations did not come to light until 1989–90, by which time other decisions had been taken which would dramatically affect Ferranti and British investors. Nevertheless, it is clear that Guerin was willing to shuffle assets between his corporations, using them in varied ways, firstly, to borrow heavily from banks, and secondly, to persuade investors to put large amounts of money into ISC, thereby making him extremely wealthy. Needless to say, had Sir Derek Alun-Jones and the

in Ferranti: A History