But his finance director John Grant says: We have made it pretty clear that

But his finance director, John Grant, says: “We have made it pretty clear that we are going to continue to focus more intensely on supplying the automotive and aerospace industries. Our ambition is to become a fully recognised world-class player in those areas, into which our electronics operations will be increasingly integrated.”Messrs Grant and Simpson accept that Lucas has an image problem, in that it is still associated in much of the public’s mind with brake-pads and bicycle lamps.While Lucas is still very much involved in brakes, it is more interested in supplying systems in which it assumes responsibility for all the components of a braking system for a particular vehicle model.This is all part of the group’s drive up the hi-tech end of vehicles, airborne and road-based, making use of as much crossover as possible between the two. This will continue, as industry estimates suggest that the electronic content of new cars is likely to double from 20 per cent to 40 per cent over the next five years.That was borne out by the recent £1bn order from Volkswagen to supply the group’s ground-breaking EUI diesel fuel injector, which is greener and more economical.”We have been dramatically outperforming the industry’s recovery,” said Mr Grant, “because of being in hi-tech systems. This is the traditional prerogative of any chief executive coming into an ailing business, and Mr Simpson took full advantage, including £88m to cover “future restructuring” and the likely costs of the US defence row.Last December, he also used the excuse of a US acquisition to make a £55m rights issue, having already said that the group had sufficient resources to write a cheque for the purchase. George Simpson will change the company enormously, giving it better performance and a different shape.”Mr Simpson, the former Rover and British Aerospace boss who became chief executive of Lucas last April, slammed £214m of provisions into last year’s figures, which is why the group showed a loss for the year to last July. Not a sell recommendation in sight.”Leaving aside the upsets caused by the Department of Defense investigations and litigation,” says Sandy Morris at NatWest Securities, “1994/95 promises to be a good year for Lucas.”Nick Cunningham at BZW rates Lucas a “core buy” on the grounds that the new management has improved the company’s focus and product innova- tion is fuelling continued growth, after recovery and restructuring.Colin Fell, Kleinwort Benson’s Lucas watcher, adds: “The whole European car market is accelerating, and Lucas’s customer base and products are growing faster than average.

Much mending of fences ensued, despite the fact that the US Navy threatened to debar Lucas from new military contracts in the US.That was dismissed as no more than a negotiating tactic. Meanwhile, the City’s engineering analysts swung in behind Lucas in a rare display of solidarity: according to the current issue of the Earnings Guide, of 14 leading researchers, eight say buy, one says add, and five say hold. The shares have jumped from 172p to 200p this month, substantially reversing a downtrend that began at the start of the year after the US government fined the group $18.5m (£11.9m) for falsifying inspection records at its defence factory in Utah.
Although the penalty had been provided for, and is hardly material in a group of Lucas’s size, news of such an aberration rattled the company’s growing City fan club. Not even Mr Alphandry could explain away that little problem..

A HUGE weight of expectation is hanging over tomorrow’s interim results from Lucas Industries, the auto and aerospace components group that nowadays prefers to call itself a provider of “advanced technology systems”. He has been languishing in a Geneva jail for the past two years, leaving the bank to pick up the bill, not just for the film companies, but also for the biggest bankruptcy in Swiss financial history – a disaster that has already led to a diplomatic row between the Swiss and French governments.Meanwhile, Crdit Lyonnais is committed to selling the studios by May 1997 to conform with American banking laws and is pumping in $200m (£126m) a year to make them saleable. This was the result of an amazingly tangled story involving two Italian spivs, one of whom, Fioretto Fiorini, had close connections with the P2 masonic lodge, Silvio Berlusconi et al. Not surprisingly, one of the two judicial investigations launched by Mr Peyrelevade concerns a big property disaster in the centre of Paris – the other involves Mr Tapie, who has already had his home and its contents seized by the bank in a vain attempt to recover some of the money it had lent him.Unmentioned at the press conference was the bank’s most curious and most embarrassing investment: its ownership of two big Hollywood studios, MGM and United Artists. Because CL was more than a mere bank, it was a symbol of French financial gloire, it could not writedown its property loans as early or as realistically as lesser institutions Moreover, it lent to some particularly shady developers.

He was, inevitably, a heavy backer of Bernard Tapie, friend of the President and “saviour” (in the short term anyway) of sundry bankrupt companies. The ordinary business loans became so notorious that the term “a client of the Crdit Lyonnais” has become synonymous with impending bankruptcy.Mr Haberer’s interpretation of President Mitterrand’s international ambitions for the bank involved heavy investment in banking networks in Italy and Germany and attempts to get into the big time through loans to all sorts and conditions of people and enterprises, from Robert Maxwell to the ill- starred Health Care International hospital in Clydebank.Even when Crdit Lyonnais followed other French financial institutions by investing heavily in Parisian commercial property at the height of the boom, it contrived its own uniquely unprofitable twists. These were at the very core of President Mitterrand’s dream of a bank that could compete with the likes of Germany’s Deutsche Bank, combining financial muscle and large stakes in strategic industrial sectors.Mr Haberer not only had to invest in any sector that needed help, he also had to submit to the President’s personal whims. From now on, CL will confine itself to ordinary banking activities and will sell off virtually all its scattered industrial holdings. And when one particularly tenacious Gaullist deputy, Franois d’Aubert, did start a campaign for answers, it was dismissed as mere politicking.Friday’s press conference marked the end of the dream.

Because of the President’s backing – and because Mr Haberer was the brightest of the bright, the extraordinary nature of his policies remained unquestioned for far too long. The only exceptions are the real culprits, President Mitterrand – naturally enough, because he is known to be dying of cancer – and a system that affords almost unquestioned power to a handful of brilliant technocrats.For the bank’s mess is a back-handed tribute to the French way of doing things, and, more specifically, to President Mitterrand’s total disdain for economic or financial reality; a scorn that led the French economy into near-disaster in the first two years of his presidency.He wanted Crdit Lyonnais to grow into the biggest bank in Europe and appointed Mr Haberer to do the job. The fall-out will also almost certainly include storms over plans by the bank to reduce its staffing levels and continuing pressure by the chairmen of other large French banks, who are complaining at the continuing support to the bank for Crdit Lyonnais.In the meantime, blame is being spread everywhere, mainly on the bank’s former chairman, Jean-Yves Haberer. This will probably be enough to satisfy Karel Van Miert, the European Competition Commissioner, even though the whole world and its banker knows that the French tax payer is going to have to continue to pick up the bill for many years to come as the true value of the assets is gradually revealed. This came at the end of a week that had seen numerous leaks preparing the French public for a full revelation of the bank’s woes, including an admission by Mr Alphandry of a “hole” in the bank’s accounts of something over £6bn.