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GEC Marconi

On 28 March 2000, the Secretary of State for Trade and Industry, Steven Byers, announced that he had accepted undertakings (the Undertakings) in lieu of reference to the Competition Commission under section 75G of the Fair Trading Act 1973 (the Act) from British Aerospace plc (subsequently re-named BAE SYSTEMS) to remedy competition and other public interest concerns arising from the acquisition by BAE SYSTEMS of the Marconi Electronic Systems business (MES) of The General Electric Company, plc. The Undertakings include measures to safeguard competition at prime contractor and subcontract level and to address national security concerns.

Alenia Marconi Systems Limited (AMS) is a wholly owned subsidiary of AMS NV, a joint venture between BAE SYSTEMS plc and Finmeccanica S.p.A. BAE SYSTEMS was created in 1999 when British Aerospace and GEC's Marconi Electronic Systems ('MES') merged, and took over joint control of AMS.

The British company Marconi plc had been known as The General Electric Co. Ltd. (GEC) for over a century, prior to changing its name and focus in 1999. During the 20th century it grew through acquisitions to become England's leading electrical company and one of Europe's top defense electronics contractors. In the late 1990s the company divested many of its traditional businesses, culminating in the $12 billion sale of its defense electronics business to British Aerospace in 1999. At the same time it began redefining itself as an information technology (IT) company with two major acquisitions, Reltec and Fore Systems, that positioned the company to compete in the rapidly changing telecommunications industry.

In the summer of 1986, the British Government opened a competition for a system to fulfill its early warning needs. Seven companies submitted bids to the Ministry of Defence: Boeing (AWACS), Grumman (E-2 Hawkeye and Nimrod fitted with U.S. avionics), Lockheed (P-3 Orion), Airship Industries, Pilatus Britten-Norman, MEL (a subsidiary of Philips Electronics), and GEC Avionics (Nimrod AEW.3). It isimportant to note that had the British been successful in developing their own early warning system, the Nimrod AEW.3, the radar for which has been under development at GEC since 1977, there probably never would have been any competition at all.

In November, 1986 Boeing upped the offset offer to 130 percent of the contract value over eight years if AWACS were selected. This figure is the highest ever made by Boeing in an international competition. By this time, Boeing had already negotiated participation agreements with three British avionics companies--Plessey, Ferranti, and Racal--and these firms publicly supported AWACS over the Nimrod. In December, the Ministry of Defence announced selection of the Boeing AWACS.

GEC was a major developer and producer of air, naval, and surface radar. GEC Avionics was a leading supplier of various systems and displays, and in 1987 acquired the flight control division of Lear Siegler as well as Developmental Sciences Corp., which manufactured remotely piloted vehicles. Other units of GEC were actively involved in the European fighter aircraft program.

GEC together with the German Siemens Company takeover of Plessey added 30 to 40 percent to GEC's naval and avionic Interests. The UK's General Electric Company (GEC) and West Germany's Siemens collectively acquired Britain's Plessey, and divided most of the pieces among the two. GEC later took over Ferranti International's radar division. Toward the end of 1988 GEC teamed with Germany's Siemens AG to try to purchase Plessey for the equivalent of $3.1 billion. In August 1989 Siemens and GEC increased their offer and made a final bid of $3.3 billion for Plessey. Under the revised merger plan, outside of North America GEC would wholly own Plessey's naval systems and avionics businesses as well as its cryptography operations, while Siemens would take over Plessey's radar and defense systems.

Within North America, GEC would wholly own Sippican Inc. and Leigh Instruments Ltd. in Canada and would take 75 percent of Plessey Electronic Systems Corp. in the United States. The GPT telecommunications venture was split 40-60 between Siemens and GEC, with GEC having management control. However, Plessey continued to defend itself from the hostile takeover by entering several new markets, including computers, telecommunications, and automotive electronics. Finally, on September 8, 1989, Siemens and GEC completed their takeover of Plessey.

During the 1990s GEC began moving away from the domestic electrical goods market and into electronics and modern technology, particularly in the defense sector. In 1990 GEC acquired parts of Ferranti, including its radar business and other gear for military aircraft. The acquisition made GEC one of Europe's main defense-electronics companies. Ferranti had recently won the highly prized $3.2 billion contract to design the radar for Europe's new fighter aircraft.

As part of its acquisition of Plessey, GEC merged its Marconi Electronic Devices unit with Plessey Semiconductors to create GEC Plessey Semiconductors. The new unit was expected to have 1990 sales of $200 million. By 1991 GEC was the fifth largest electronics firm in Europe. GEC's vision for the 1990s, as articulated by Arnold Weinstock, was to become a world force in semiconductors and telecommunications. In 1992 a single European market became a reality.

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Page last modified: 14-05-2013 19:27:08 ZULU