Alvis Plc

views updated

Alvis Plc

34 Grosvenor Gardens
London SW1W OAL
United Kingdom
Telephone: (+44) 20 7808 8888
Fax: (+44) 20 7808 8877
Web site: http://www.alvis.co.uk

Public Company
Incorporated: 1909 as TG John Ltd.
Employees: 1,600
Sales: £203.5 million ($325.6 million) (2000)
Stock Exchanges: London
Ticker Symbol: ALV
NAIC: 336992 Military Armored Vehicle, Tank, and Tank Component Manufacturing

Alvis Plc has weathered the odds to become a candidate for the position as the United Kingdom’s sole surviving armored vehicle supplier. After absorbing former rival GKN’s armored vehicle division in 1998, Alvis has made public its intention to acquire Vickers Defence Systems, the heavy-armored vehicle component of Rolls-Royce, in 2002. The acquisition would not only place Alvis as the United Kingdom’s top armored vehicle maker but also give it a leading place on the European market. Alvis concentrates on designing and manufacturing light armored vehicles, such as the wheeled armored vehicle Scarab, the Supacat all-terrain vehicle, the Warrior infantry fighting vehicle, the Piranha armored vehicle, and the Stormer armored vehicle. Alvis is also a partner in the MRAV (multi-role armored vehicle) being developed by the Artec consortium. The company, headquartered in London, has manufacturing facilities both in the United Kingdom and, through its tracked armored vehicle subsidiary Hägglunds, in Sweden and elsewhere in Scandinavia. Led by CEO and Chairman Nicholas Prest, Alvis has undergone a thorough streamlining since the end of the 1990s, cutting out most of its noncore operations, such as its stake in Singapore’s Avimo optical glasses operation, a remote controlled bomb disposal robotics unit, and its Barracuda Technologies camouflage equipment subsidiary.

Automobile Maker in the 1920s

Alvis began operations when T.G. John, an engineer who had designed battleships for Vickers during World War I, founded a business to design and manufacture motor cars. The company, TG John Ltd., was based in Coventry, which had by then become a major British automotive manufacturing center. John’s earliest production, however, focused on manufacturing stationary and scooter engines while the company developed its own automotive design.

By 1920, John had found its first automobile, based on designs by French engineer Geoffrey de Freville, who had set up a company producing aluminum pistons in 1914. De Freyville chose the name “Alvis” for his automobile design, in part because it sounded good in a variety of languages. The first Alvis car, called the 10/30, was launched in 1920, and by the following year, the company had changed its name to The Alvis Car & Engineering Co. Ltd.

The launch of the 10/30 was not enough to guarantee the company’s survival, and the company began to waver toward bankruptcy. In 1922, the company brought in two new employees. G.T. Smith-Clarke, who had designed cars for Daimler, became chief engineer, and W.M. Dunn was named chief draughtsman. Both were to remain with the company for nearly 30 years and took over the design and engineering of the company’s automobiles. T.G. John, meantime, shifted his focus toward the company’s administrative and financial operations.

In 1923, Alvis launched its second model, 12/50, which became the company’s first successful automobile. By then the company had gone bankrupt and was placed into receivership. Yet the success of the 12/50 enabled the company to climb back onto its feet and by the end of the decade Alvis had built a strong reputation for the quality of its automobiles and for its technical innovation. During the decade, Alvis models came to include such features as front-wheel drive, an all-synchromesh gearbox, and four-wheel independent suspension, which not only helped win the company new orders, but also helped it win a number of races, including the Brookline 200 in 1923, won with a car featuring an engine with four valves per cylinder. By then, the company already had carved out a niche for itself in the luxury car class, as something of a “poor man’s Bentley.”

The 12/50 was replaced by models including the Speed 20 and the Speed 25 and by the end of the decade the company boasted cars capable of offering a “genuine” 100 mph top speed. Yet during the 1930s, Alvis sought to diversify its operations. The company began production of aircraft engines, building a new manufacturing facility next to its existing plant, and then began developing designs for tanks and armored cars. The company continued to produce new automobiles, meanwhile, including the 12/7, introduced in 1938, and the Silver Crest, which also debuted before the end of the 1930s. The development of the company’s aircraft and military vehicle components led it to shorten its name, to Alvis Ltd., in 1936.

The outbreak of World War II, however, gave a boost to Alvis’s aircraft engine and military vehicle production. The company scored a new success with its Leonides aircraft engine, unveiled in 1939. During the war, Alvis became an important contributor to the United Kingdom’s war effort, becoming a primary producer of the Merlin engine for the Lancaster bomber. Although the destruction of much of the company’s automotive manufacturing plant during bombing raids in 1940 forced the company to place greater emphasis on its aircraft engine production, the company also began to produce a steadily growing number of light armored vehicles.

Postwar Armored Vehicle Specialist

Alvis faced an uphill struggle rebuilding its automotive business in the postwar period. The company’s position in the luxury automobile class exposed it to the high taxes placed on this class of car. Alvis adopted a new policy of producing only one model of car at a time. The first of its postwar cars was the TA 14 of 1946, which remained in production until 1950 when it was replaced by the TA 21. The 1950s saw the company’s full-fledged entry into the light-armored vehicle field with the launch of its Saladin and Saracen high-mobility vehicles; as with the company’s later products, these were wheeled—rather than tracked—vehicles.

Alvis followed up these two early armored vehicle models with the release of its Scorpion in the mid-1950s. A light-armored vehicle useful for reconnaissance missions, the Scorpion became the company’s most successful vehicle design and was to remain in production into the next century. Alvis continued to make cars, but was finding it increasingly difficult to find suppliers for its car bodies. At the same time, the automobile division was losing money, kept in operation in part for its public relations value as the Alvis brand grew to become one of the most treasured of British classic car enthusiasts. The company produced several new models during the 1950s, including the TC 21/100 (capable of speeds greater than 100 mph) and the TD 21, designed in part by Hermann Graber of Switzerland. Another model, the TE 21 launched in 1964, was to be Alvis’s last car. Meanwhile, the company’s aircraft engine designs were facing a declining market as the aviation industry switched over to gas turbine engines during the 1960s.

Alvis was acquired by Rover in 1965, which in turn was taken over by British Leyland, then the United Kingdom’s largest car-making group, in 1967. Leyland promptly ended production of the Alvis car and also cut out its aircraft engine manufacturing division. Although the company continued to produce parts and components for the aircraft industry, Alvis now began to specialize in its light armored vehicle class, propelled by the continued success of its Scorpion series.

During the recession of the 1970s, Alvis was more or less overlooked by its hard-pressed parent. Finally, in 1981, Alvis was sold off to United Scientific Holdings (USH). That company had originated as a seller of military optical equipment in the 1960s. Through a series of acquisitions as well as through its own organic growth, USH had grown into one of the United Kingdom’s leading designers and manufacturers of military sights and other optical equipment. Yet USH ran into difficulties during the mid-1980s after its longtime chief executive left the company for a position with the British defense department. As military spending began to dry up as a result of the end to the Cold War, hard-hit USH cycled through a series of chief executives. By 1989, the company had become a target for a hostile takeover by Meggitt, one of its chief competitors.

Nicholas Prest, who had joined USH as a marketing director in 1982, was appointed chief executive and charged with defending the company against the takeover attempt. Ultimately, however, USH’s own dismal performance, as it slipped into losses at the end of the decade, scared Meggitt off. Prest was now faced with the task of rebuilding USH in the midst of the post-Cold War era drop-off in military spending.

Company Perspectives:

The strategic aim of Alvis is to achieve above average returns to shareholders through profitable growth in the market for military vehicles and related products. In turn, this requires that we satisfy the aspirations of our customers and employees in a high degree.

In pursuit of this aim Alvis employs a business formula which combines: high quality applications engineering and project management; concentration on “high-end” product niches; intense efforts to understand our customer needs and match our product offerings to them; global marketing reach; and a management style which mixes delegation and encouragement of entrepreneurship with simple but effective controls.

Prest began trimming USH’s operations at the beginning of the 1990s, selling off a number of its optics subsidiaries. By 1992, the company’s focus shifted still closer toward its military vehicle division when the company changed its name to Alvis Holdings Plc. The following year, the company restructured, splitting off its optics division into a 51 percent stake in Singapore-based Avimo, a public company listed on the Singapore stock exchange. The spinoff enabled the company to slash its debt. Meanwhile, Alvis went on a cost-cutting spree in its remaining operations, which included reducing its own manufacturing costs by subcontracting for certain components. These measures helped the company boost its profit margins on its armored vehicle range.

European Leader for the 21st Century

By the mid-1990s, Alvis’s profits were leading the European armored vehicle market. Yet Alvis was preparing to move to a new level. In 1997, the company surprised the industry when it announced its agreement to acquire Swedish light armored vehicle maker Hägglunds. The purchase, at a cost of £80 million, doubled Alvis in size, allowing it to stand shoulder-to-shoulder with U.K. market leaders GKN and Vickers. Hägglunds also brought Alvis a complementary product range—the Swedish company concentrated on tracked vehicles—as well as complementary geographic scope.

Alvis struck again a year later when it announced that it had reached an agreement to acquire GKN’s light armored vehicle division in exchange for a 30 percent stake in Alvis. The deal now placed Alvis in a position of strength from which to prepare for the forecasted consolidation of the European armored vehicle market, which numbered more than 30 major companies competing for a steadily shrinking number of vehicle contracts. The GKN purchase also gave Alvis a stake in the contract for a new class of MRAV vehicles—a contract Alvis had lost out on when it bid in partnership with Vickers.

Following the GKN acquisition, Alvis moved to become a pure-play vehicle manufacturer, shedding a number of its non-core operations, including its Barracuda camouflage equipment division, sold to Saab in 1999, and nearly half of its stake in Avimo, sold to Thales (formerly Thomson-CSF). The following year, Alvis sold off a subsidiary that manufactured robots for bomb disposal units to Northrup Grumman. Then in 2001, Alvis sold off the rest of its share of Avimo to Thales. The company also shut down its historical Coventry facilities, moving its manufacturing operations to Telford.

By the beginning of 2002, Alvis was ready to continue its singlehanded consolidation drive. In February, the company announced that it was in advanced talks with Rolls-Royce to acquire that company’s Vickers Defence Systems unit, a specialist in heavy-armored vehicles. Such a move would create a single British armored vehicle manufacturer. At the same time, analysts began suggesting other possible marriage prospects for Alvis, including Germany’s Krauss-Maffei Wegmann, and U.S.-based United Defense, owned by Carlyle, creating a U.S.European armored vehicle giant. Alvis entered the 21st century not merely an unlikely survivor, but a possible leader of the coming consolidation of its market.

Principal Subsidiaries

Alvis Vehicles Ltd.; Hägglunds Vehicle AB; Artec Consortium; Patria Hägglunds OY (50%); Hägglunds Moelv AS.

Principal Competitors

CIC International Ltd.; AM General Corporation; General Dynamics Corporation; GIAT Industries S.A.; Krauss-Maffei Wegmann GmbH & Co; United Defense Industries, Inc.

Key Dates:

1919:: T.G. John founds company to develop automobile designs in Coventry, England.
1920:: The first automobile, the Alvis 10/30, is launched.
1921:: The company changes its name to the Alvis Car & Engineering Co. Ltd.
1923:: The 12/50, the company’s first successful automobile design, is launched.
1936:: The company shortens its name to Alvis Ltd. as it diversifies and begins designing and manufacturing aircraft engines and armored vehicles.
1938:: The 12/70 automobile is unveiled.
1939:: The Leonides aircraft engine is introduced.
1950:: Alvis enters the light armored vehicle field with the launch of its Saladin and Saracen high-mobility vehicles.
1955:: The Scorpion-class light-armored vehicle becomes the company’s market breakthrough.
1964:: The TE 21, the last automobile designed by Alvis, is launched.
1965:: Alvis is acquired by Rover, which is then acquired by British Ley land in 1967.
1981:: The Alvis armored vehicle division is acquired by United Scientific Holdings.
1992:: United Scientific Holdings undergoes restructuring, focusing on armored vehicles and changing its name to Alvis Holdings Plc.
1997:: Alvis reaches an agreement to acquire Hägglunds Vehicle AB, the largest light-armored vehicle maker in Scandinavia.
1998:: Alvis merges with GKN’s light-armored vehicle division, creating the United Kingdom’s largest armored vehicle manufacturer and one of the largest in Europe.
2001:: Alvis sells off its remaining noncore holdings to become a “pure-play” armored vehicle manufacturer.
2002:: Alvis indicates its interest in acquiring the heavy armored-vehicle division from Vickers.