Lucas Industries Plc Business Information, Profile, and History

History of Lucas Industries Plc

Lucas Industries's automotive division, the basis of the company's activities since before 1910, accounts for nearly two-thirds of the company's turnover, and makes Lucas one of the ten largest suppliers of automotive components in Europe. In the 1990s, as in the 1900s, the key to Lucas's success is diversification--both through acquisitions, mostly overseas in recent times, and through developing new products. As recently as 1980 the company's chief products were batteries, lamps, and other electrical components for British motor cars. By 1990, its automotive division had survived the collapse of the British motor industry by moving into producing high-tech engine-management systems and braking systems for car companies all over the world, while its aerospace and industrial divisions are in the forefront of product innovation and cross-border joint ventures.

This enormous and diverse company has its origins in Birmingham, home of Joseph Lucas, one of the minor industrialists, or "little masters," whose enterprise characterized the city in the mid-19th century. His first business ventures were far removed from the sophistication and range of the Lucas Industries of today. Lucas began the 1860s as a dealer in hollowware such as buckets, shovels, and chamber pots, as well as paraffin. In 1875 Lucas founded the Tom Bowling Lamp Works, named after the ship's lamp which was its main product, and Joseph Lucas's business began to prosper. From about 1880 the management of the company passed increasingly into the hands of Joseph's son, Harry, and in that year Joseph Lucas received a patent for The King of the Road bicycle lamp that made the company's name and fortune. The partnership of Joseph Lucas & Son, set up in 1882, was vigorous in defending the patent against the numerous copies that appeared, and in expanding the range of goods offered in its catalogs, with the aim of supplying everything that cycle repairers and manufacturers might need. By 1897, when Joseph Lucas & Son was incorporated as a public company, it had achieved a leading position in this area and was ready to move into what Harry Lucas called "motoralities."

In its growth from a small family firm into a household name, Lucas resembled other West Midlands enterprises of the day, such as Cadbury Brothers, GKN, and Austin Motor Company. Lucas also benefited from being in the right place at the right time. As the 20th century began, motor manufacturers found that companies already established in the Midlands were well able to supply the components they needed, so, unlike elsewhere, there was no development toward vertical integration. Lucas made itself indispensible to the British motor industry from its creation, and from this early stage continued to benefit from economies of scale.

Joseph Lucas died in 1902, just as investment in research on motor vehicle components was causing the company's profits to fall. The company showed its commitment to its new interests by opening a showroom in London soon after Joseph Lucas's death, and from 1904 to 1907 sales and profits rose steadily, stimulated by the legislation of 1903 that had made cars more attractive to potential customers by raising the speed limit, and had also made the components industry much busier by making lights compulsory at night. In 1914 Lucas's catalog offered six kinds of complete dynamo lighting systems for cars. In the same year the company acquired Thomson-Bennett, which specialized in magnetos, and so extended its product range to include ignition equipment. The timing was excellent. World War I saw an unprecedented rise in the demand for magnetos, for airplanes as well as for cars and motorcycles. Yet it may have seemed that the government was giving to Lucas with one hand and taking away with the other, for the introduction of British Summer Time--daylight savings--in 1916 led to a permanent fall in the sales of cycle lamps. It was this change, and the impact of the slump immediately after the war, that induced Lucas to shift the balance of its business by introducing much cheaper versions of its cycle lamps and by negotiating with the motorcycle manufacturers to take Lucas's combined magneto-dynamos rather than those made by the company's German rival Bosch. Thomson-Bennett (Magnetos) was renamed the Lucas Electrical Company in 1919, probably in order to maximize the benefits of the parent company's reputation.

In 1923 Harry Lucas went into semi-retirement as a consultant director. He died in 1939. The company came under the control of his son, Oliver Lucas, and of Peter Bennett, formerly of Thomson-Bennett, as joint managing directors, and expanded rapidly is size and range. The company used its market position to enforce restrictive agreements with its potential rivals in the same fields. Although at first William Morris of Cowley, Oxford, was by far the biggest customer for Lucas's starting and lighting equipment, management knew that, like other leaders in light engineering, Lucas's strength depended on responding flexibly to changes in the market, and were careful to maintain close relations with Morris's rivals as well. The company continued the policy of investing vigorously in acquisition, rather than in research and development. The biggest acquisitions of the interwar years took place in 1925, when Lucas bought out two rivals in the motor accessories business, CAV--which dominated the supply of components for commercial vehicles--and Rotax. This gave Lucas a virtual monopoly of lighting, starting, and ignition equipment until after World War II when Ford and General Motors both set up in-house components plants. After some initial suspicion the major motor manufacturers of the day appear to have accepted this situation, since Lucas was able to pass on to them the benefits of the economies of scale which these acquisitions permitted.

In other cases Lucas mixed acquisition with restrictive agreements, for example in 1930, when S. Smith & Sons sold its lighting, starting, and ignition operations to Lucas, and the two companies then drew up lists of products each could manufacture only with the other's consent. Again, in 1931, Lucas and its former rival Bosch of Germany set up a joint venture, CAV-Bosch, to develop diesel engines, and made an agreement to stay out of each other's markets for motor components. CAV-Bosch passed entirely to Lucas in 1937, when the German company, probably under pressure from the Nazi government, sold its interest. Lucas was faced with the first strike by any of its workers in 1932, when 140 objected to plans to introduce bonuses based on time and motion studies. The plans were withdrawn, only to be implemented two years later as the "Lucas Point Plan System," with the result that the workers did one-and-a-half times as much work as before for one-and-a-third times as much pay.

Another agreement with a foreign company, this time with the Bendix Corporation, provided the basis for what is now Lucas Aerospace. Rotax and CAV had made Bendix starter drives for cars since before Lucas took them over. In 1932, Bendix, which was leaving the motor industry in order to expand its aviation business, sold two-thirds of the shares of its British brake-manufacturing subsidiary to Lucas, along with licenses for Rotax to make aviation equipment, such as the inertia starter then being introduced for larger airplanes. Once again, Lucas benefited from the research spending of others, including, in this case, the U.S. government, and as Rotax grew it continued to rely on licenses from Bendix far more than on internal research.

Meanwhile Lucas protected its near-monopoly in the British motor-components industry through an agreement with Autolite, the leading firm in the U.S. market. From 1937 to 1940 Lucas paid Autolite $50,000 a year to stay out of Britain, promised to stay out of the U.S. market in return, and arranged to exchange technical information and licences. A company that had made itself the country's main supplier of motor components, and was fast becoming crucial to the aviation industry too, was bound to benefit from the rearmament of the late 1930s and the war production which followed. Even after the sale of new cars was banned and the production of commercial vehicles was restricted, orders for equipment for motor vehicles, especially the Bedford truck favored by the army, as well as equipment for boats, airplanes, and motorcycles, made Lucas's output higher than it had ever been in peacetime. Oliver Lucas served on the government's supply council, and directed design and development at the Tank Board, but it is not clear whether his involvement in the development of the jet engine during the war began as an official or as a commercial matter. In the end, it was CAV's experience in fuel injection and Lucas Electrical's skills in sheet metal working that ensured that Lucas took full advantage of the opportunity and engaged in research on combustion, development of the fuel system, and manufacture of the relevant equipment for the jet.

The withdrawal of government contracts at the end of the war left Lucas a more prosperous and diverse company than it had been six years earlier. Its traditional expertise in components was now taken up with orders for spare parts and repair work, and complemented by the company's involvements in the jet project and the growing market for diesel engines both in Britain and abroad. Even the resources committed by its Rotax subsidiary to work on the expensive and unsuccessful Brabazon airliner, in the late 1950s, was not wasted, since the technical knowledge gained from the project was applied to work on V-bombers, starting with the Vickers Valiant in 1948.

In 1951 Lucas set up a series of divisions each based on the respective subsidiary company, with central control limited to matters of personnel and finance, under a renamed holding company, Joseph Lucas (Industries) Ltd. Its chairman was Bertram Waring, who had been joint managing director with Peter Bennett from 1948, when Oliver Lucas died. There followed a decade of growth for CAV, based on the development of the first mass-produced distributor pump and of more sophisticated electrical equipment for commercial vehicles; for Rotax, working on the V-bomber series and on electrical-generating equipment for tanks; and for the components division, as mechanical windshield wipers, reversing lights, and long-range driving lights appeared and became standard. Thus the Lucas group continued to play its strongest cards, building upon its reputation and near-monopoly in the components field, and on its past record for government contracts in aviation and electricals. At the same time, the cycle-accessories business from which all these modern activities had developed was in decline, and Joseph Lucas (Cycle Accessories) was closed in 1962.

In 1963 a Monopolies and Mergers Commission revealed that up to 1956 Lucas and its nearest rival, Smiths Industries had operated under a restrictive agreement which divided up the market between them. This explained why the most important division, Joseph Lucas (Electrical), concentrated on electrical components other than instruments. The report concluded that the domination by Lucas and a few other companies of the motor components industry, whether sustained by restrictive agreements or not, was justified in order that the motor industry should continue to have reliable supplies of cheap but good-quality components.

Nevertheless, Lucas was soon exposed to an unfamiliar degree of competition as the strikes that hit the components industry in the late 1960s encouraged motor manufacturers to abandon old loyalties and switch to multi-sourcing for their components needs. The impact that a strike, at any stage of the car production process, could have was demonstrated spectacularly in August 1977, when a strike by Lucas tool-makers closed down the entire U.K. car industry. Even so, Lucas and its rivals within the British components industry were able to stay ahead of overseas competitors as long as the British motor industry itself was in the forefront of development. The British Motor Corporation was the first company in the world to introduce front-wheel drive, for example, and Lucas and the other component firms retained their leading position on the basis of their familiarity with this new technology. Meanwhile CAV, already the world leader in making fuel injection equipment swallowed up a rival, Simms, in 1968, which gave it 90% of the British fuel-pump industry.

Between 1967 and 1970 the group's aerospace division spent more than ¥20 million, ¥3 million of which was lent by the government's Industrial Reorganization Corporation, on making acquisitions that increased its size by 50%, but that also meant that it came to depend to a large extent on supplying Rolls Royce's airplane-engine business. Following the financial collapse of Rolls Royce in 1971 Rotax, renamed Lucas Aerospace, laid off one-sixth of its workforce, but then picked up new orders from the Ministry of Defence, becoming one of its leading contractors, with the result that nearly half of Lucas Aerospace's business is military. In 1976 a combined committee of the company's shop stewards made several suggestions for diversifying away from military production into a variety of other fields, which became famous as The Lucas Plan, but these suggestions were rejected by the management. The only loss-making part of the aerospace division's business proved to be Thomson-Lucas, a joint venture--with the French company Thomson-CSF--which was dissolved in 1988. Lucas Aerospace remains Europe's largest designer and maker of aircraft equipment, and the only company in the world to manufacture every component system used in aircraft both military and civil, apart from navigation, radio, and flying controls. In 1973 the non-aerospace elements of the former Rotax subsidiary were spun off to a new company, Lucas Defence Systems.

Lucas began the 1970s as the 54th-largest British company. Kenneth Corley was appointed group chairman in 1970, to be succeeded after only three years by Bernard Scott, at which time Bertram Waring retired, after 47 years at Lucas, a period which had taken the company from national dominance in cycle and motor accessories through to participation in worldwide changes in the motor and aerospace industries. In 1970, the group was five times the size it had been only 20 years before. The renaming of the group in 1974, as Lucas Industries, was accompanied by the introduction of a uniform corporate identity for all its subsidiaries. The name Lucas was added to each subsidiary's name, and Lucas Industries became the first group--as opposed to individual company--to advertise on British television. To offset falling orders from the home market Lucas, along with GKN, led the way in expanding into continental Europe, beginning with investments in France, West Germany, and Italy, including taking full control of Rotodiesel, the leading firm in the French diesel market, in 1974. The next move was into the United States, and the manufacture of the diesel-powered vehicle which the oil crisis of the mid-1970s had suddenly made attractive. The group is involved in markets all over the world, through its existing subsidiaries and its program of acquisitions. By 1975, for example, one-third of all cars made had brakes manufactured by the Lucas subsidiary Girling or its licencees. Nevertheless, it was the Lucas Battery Company which had the highest level of overseas manufacturing of all the Lucas companies.

Expansion through acquisition abroad has been accompanied by stabilization through restructuring at home, under the successive chairmanships of Godfrey Messervy and, since 1987, Tony Gill. Just as Lucas had benefited from the growth of the British car-assembly industry in the 1960s, so it suffered as the industry contracted in volume production and fell behind in product development, and in 1981 Lucas showed an overall loss for the first time in its history. The group was back in profit by 1983, thanks to its nonautomotive divisions, and from then on the group's activities moved largely out of the United Kingdom into overseas markets. Between 1979 and 1988, the proportion of U.K. sales to total group turnover fell from 51% to 38%, and from 1989 onwards the non-U.K. subsidiaries accounted for a greater proportion of group sales than did the British subsidiaries. This change in markets was accompanied by major cuts in the U.K. production base; between 1985 and 1989 the group as a whole disposed of 14 units, closed 25 production sites, and cut its work force by 35,000.

The restructuring of the components side of the group culminated in 1988 with the creation of Lucas Automotive as the largest of the group's three divisions, bringing together the subsidiaries remaining after Lucas had withdrawn from automotive lighting, starter motors, and alternators, and concentrating on producing engine-management and braking systems. The new division followed the trend in the components industry toward supplying complete systems rather than separate parts, designed in much closer collaboration with the car makers than had been customary. There has been an increasing degree of partnership with Japanese corporations, such as with Sumitomo on car-body systems, or Yuasa Battery Company on car batteries, in response to the growing likelihood that Japanese components firms will make inroads into the European market as deeply as they already have in the United States. Lucas Automotive's success in 1989 in attracting orders from BMW and Saab-Scania for fuel injection systems was an indication of its ability to compete directly in Europe.

In the motor industry, on which Lucas still depends for more than half of its business, the trends towards globalized production and demand, high technology, and greater expectations of high-quality production seem likely to go on challenging Lucas Automotive and its rivals in the components industry. The involvement of Lucas Aerospace in work on the A330 and A340 airbuses, and on the EJ200 engine for the forthcoming European fighter aircraft, suggest that this division will depend less on national orders and more on multinational projects. Lucas Applied Technology, the smallest of the group's three divisions, includes specialist subsidiaries likely to grow in response to the increasing demand for high technology, such as Lucas Industrial Systems, which produces electronic measurement and control equipment for a variety of industrial processes, or Lucas Instruments, the world's major designer of acoustic and vibration measurement equipment.

Throughout its history Lucas has proven to be flexible in making the most of social change and political decisions. This flexibility allowed it to grow from a small family firm specializing in cycle accessories in the second half of the 19th century to a company involved in automotive components and aerospace from the earliest days of each of these industries, and finally into a multinational giant with interests and commitments far beyond its Birmingham origins. In the past, this flexibility has been Lucas's major strength, while its weakness has been a recurrent tendency to become too dependent on its monopoly position and its tradition of close contact with the British government. The future of Lucas Industries needs to be seen within the context of the single European market, where Lucas will be competing against powerful rivals, in Europe and in the world, both for private business and for government contracts.

Principal Subsidiaries: Lucas Aerospace Ltd.; Lucas Automotive Ltd.; Lucas CAV Ltd.; Lucas Electronics Ltd.; Lucas Industries Inc. (U.S.A.); Lucas Industrial Systems Ltd.; Lucas Engineering & Systems Ltd.