CONFIDENTIAL COMMERCIAL IN CONFIDENCE

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CONFIDENTIAL

COMMERCIAL I N CONFIDENCE

SUMMARY OF M I N I S T E R I A L D I S C U S S I O N AT M I S C IS The

22(79)2nd

MEETING

Oc)ola

M i n i s t e r i a l d i s c u s s i o n y o o t o r d a y may h e s u m m a r i s e d

as follows:

Objective

To

improve

t h e management o f R o l l s R o y c e a s a m a t t e r o f u r g e n c y .

Constraints 1

M a i n t a i n consumer c o n f i d e n c e

a crisis 2

of

Retain

him

and a v o i d

financial

c o s t s oir­

confidence. S i r Kenneth K e i t h

i n a r o l e which

does not i n v o l v e

i n d a y t o d a y management.

Method

If

possible

the

GEC management team

provision

of a chief

Constraints 1

of S i r Arnold Veinstock

a v a i l a b l e t o R o l l s Royce;

executive.

GEC a s s i s t a n c e w i t h o u t

To a v o i d

prejudicing decisions

preconditions interests.

on t h e f u t u r e

a n d o v e r b u r d e n i n g GEC s e n i o r

Sir 2 Sir

Prime M i n i s t e r

management.

Arnold

and two S e c r e t a r i e s o f S t a t e

t o sec-

Weinstock.

Secretary

of State

f o rIndustry

Kenneth K e i t h .

s u b s e q u e n t l y t o sec,

\





of the nuclear

Process

1



including the



s a l e s t o GEC o f t h e R o l l s IMD and n u c l e a r

industry

and

on M e t h o d

To seek t o secure

about 2

by making t h e e x p e r t i s e

CONFIDENTIAL

COMMERCIAL I N

Position

of

S i r Kenneth

Alternatives:

CONFIDENCE



Keith

President

) ; Chairman)

Non-executive, p a r t - t i m e

concentrating

on s a l e s and

customer

relations

Constraints:

1

Veinstock

not

work w i t h

2

But

Keith,

a s y e t we

A GEC

man

a GEC

take-over

interest Mr

t h a t Morgan

considers

(like

except

have not

as

as C h i e f

President.

settled

on

S i r K e n n e t h Bond) would and

compound t h e

i n r e l a t i o n to

any

an

a l t e r n a t i v e to

add

to

difficulties

possible

outraged

and

willing

as

to

a b o u t M o r g a n and

3

The

the

more d r a s t i c t h e of

the

a p r o f e s s i o n a l he

mind

difficulty

take

future

getting

the

GEC.

job,

could





the over

but

conflict

would want

of

the

i f Keith

to

of

GEC.

C h a i r m a n on not

Keith.

appearance

s a l e s to

A s h l e y Raeburn, r e c e n t l y promoted to V i c e

b o a r d w o u l d be

Executive

make up

RR



own



is

his



immediate

change the

c o - o p e r a t i o n of

greater

S i r Kenneth

the



Keith.

Conclusion

1

Preferred

presidency

and

Choice: consult

Aim

to

or

2

fall

to

fall i)

back:

Against

i n t h i s way back p o s i t i o n Keith Morgan

ii)

immediately

(part-time

i n S h e l l ) about

RR

to



board

chairmanship



­

Raeburn.

himself

solution

Keith

S i r F r a n k McFadzean

member f o r whom R a e b u r n w o r k e d

As

elevate

Keith

i s not

the

possibility

that

an

immediate

a v a i l a b l e seek Weinstock's

i n which

c h a i r m a n when

arrives;

moves t o p r e s i d e n c y

agreement

|

becomes n o n - e x e c u t i v e p a r t - t i m e

a f t e r 3-6

months.





CONFIDENTIAL

COMMERCIAL I N CONFIDENCE

Status

o f Mr

Morgan

Alternatives

Rolls

e m p l o y e e who

Secondment

Constraints

from

Mr M o r g a n ' s

severs links

GEC.

views,

with

GEC.





w h i c h a r e unknown.

Comment

Unless

Mr

Morgan s e v e r s h i s l i n k s

confidence

w i t h GEC

no-one

will

have



t h a t any s u b s e q u e n t n e g o t i a t i o n s on d i s p o s a l s o f

parts

o f o r t h e whole of R o l l s - I i o y c e

arm's

length

t o GEC

would be

on

an

basis.

Conclusion

It

i s i n the interests

should

sever links

sufficiently

Note

The

If

a chief

respect managing

be

Morgan

offered

a

him

t h a t GEC

should

be

As p a r t o f s u c h

employed

to accept

to



that.

Morgan d e r i v e s f r o m t h e D e p a r t m e n t

of

provide

an a r r a n g e m e n t GEC

a s c o n s u l t a n t s were t o be abandoned reason

would

distinguished record

among R o l l s

there

f o r e m p l o y i n g Mr M o r g a n e x c e p t

r e p u t a t i o n as a tough engineering

sufficiently

and

and he s h o u l d

t h a t Mr



executive.

b e no p a r t i c u l a r

Rolls

and GEC

c o n t r a c t to induce

o f Mr

services.

t h e u s e o f GEC

a good

GEC

attractive

proposal

consultancy provide

with

employment

Industry's

o f Government

manager

as an e n g i n e e r

Royce e n g i n e e r s

with

would

t h a t he has a

t o command

and a p r o v e n r e c o r d

as a

director.

R o y c e have employed

t h e i r work

possibilities,

consultants to find

has progressed but t h e i r

to the point

quality

3

a chief

executive

of i d e n t i f y i n g

and a v a i l a b i l i t y

two



i s uncertain.



CONFIDENTIAL

COMMERCIAL I N

Role

o f GEC

CONFIDENCE

- B e y o n d p r o v i d i n g Mr

Alternatives

1

No

role.

2

Employed

appointment to R o l l s 3



immediately to provide

a f t e r Mr

a consultancy

GEC



service

t h a t t h e y w o u l d be

a service

such

to R o l l s

decision

on

this

formal

t o be

ready

Royce

G o v e r n m e n t ) a t some l a t e r . s t a g e

severs

Morgan's



Royce.

Agree with

provide

Morgan



(or to

i f asked,

deferred until

connection

with

to

the

but

Rolls

t h e NEB



a





after



legislation.

Comment

The

Dol

a d v i s e t h a t one

problems of R o l l s executive with

of the Dol

NEB:

Murphy

w o u l d be A

and

effectively

t h e GEC's top o f GEC

w o u l d h a v e no

more e f f e c t i v e

justification

Royce

two

On

the

the board

same t r e a t m e n t

hand, the

of R o l l s

Government

and

e x e c u t i v e has need.

employment

Royce

i f they

being

NEB of

the

as

an

accept

sought by

o f GEC

in

the

established himself

removal

of

the

of

likely

seen

confidence only

convinced

Leslie

Leyland.

w e l l be

be





true, i s

British

i t may

and

control

controlling

o n l y way

could

at a l l ,

at

between S i r

e x p r e s s i o n o f no GEC

chief

think that

distinguished public servants while

l e a d to the

other

as b e i n g



a good p u b l i c

to

the

to Parliament

a

from t h e

reason

than

as

the

management t e a m

w o u l d be

removal of R o l l s

S i r K e n n e t h K e i t h and

to

of the

come t o g r i p s w i t h

i n terms of t h e breakdown i n r e l a t i o n s

retaining

chief

of

employment

f o r the

Royce.

t h e NEB

The

cannot

as q u i c k l y or

Parliament

unaided

Rolls

Royce

the backing

Stanhope Gate. justification

man



by

by



the

after

the

Conclusion

Given

t h a t a determined Royce board

effort

should

be

that the use

o f GEC

i s i n the

1

made t o p e r s u a d e best



h i s colleague,



Rolls



the

interests



CONFIDENTIAL

COMMERCIAL I N CONFIDENCE

of

t h e company, b u t r e c o g n i s i n g t h a t i t may b e i m p o s s i b l e

unacceptable ( i )

(ii)

seek

r e s i g n a t i o n s from t h e R o l l s

Royce

t o s e c u r e S i r Arnold. W e i n s t o c j k ' s

in

a l l of the three p o s s i b i l i t i e s j b u t

in

that order,

being

without

board,

co-operation with

2 and

3,

preferred;

seek Weinstock's help with S i r Kenneth K e i t h i n g e t t i n g 2 or, as a fallback, consultancy,

3, n o t i n g

n o t management.

1

that GEC s role i s



CONFIDENTIAL

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Disposals

to

CONFIDENCE



GEC

Options 1

I n accordance

Committee,

with

a n x i e t i e s expressed

a firm decision against

sales

i n the

t o GEC

MlSC

22

of R o l l s

Royce

interests.

2

No

but

n e g o t i a t i o n now,

statement

private

of

i n IMD

and

i t will

course

that

avoid

future d i f f i c u l t i e s Subject

with

S i r Arnold

commitment

and

n u c l e a r by

tract

3

no

to

i n t e n t i o n to r e t u r n R o l l s

s e c t o r i n due

interest

and

not

extend

future

or p a r t s

to these

two

RR/GEC company f o r i n d u s t r i a l

i t to

the

conflict

of

possibility and

marine

consultancy

businesses interest.

t o t h e w i l l i n g n e s s o f t h e M l S C 22 Weinstock the

of



r e c o g n i t i o n of GEC's p o t e n t i a l

p r o v i s i o n i n any

over

negotiations,

of

so

as

to



Committee,

a jointly

engines,

c o n ­

explore

owned

under





GEC



management.

Comment

GEC

v e r y much w a n t IMD

which,

should

industrial Disposal an

p r e v i o u s l y made t h i s

subject to M i n i s t e r i a l

indicated

be

and

logic

has

so

be

d e c i s i o n s , Dol

acceptable,

f r o m t h e UK

and

point

f a r been r e s i s t e d

obstacle to h i s

by

concurrence.

condition

officials

which they of

a

had

considered

had



view.

S i r K e n n e t h K e i t h and

could





Conclusion

In

view of the

seek

to

strong Ministerial

s e c u r e GEC

co-operation

n u c l e a r d e c i s i o n , and weigh

a g a i n s t them last

(The given

any

against:

of

these

and

future

i s crucial on

to

assurance

i n any

commitment Cable

an

a n x i e t i e s on

BAe

course

acquisition but

where t h e r e

Wireless

point,

2 above, p l u s

that their

t o GEC,

this

role they

they

are

should

strong

i s a possibility,

but

the

i n RR may

to





will

not

envisage. be



arguments



no

not

more

than





that.)

The as

possibility a

of

course

3 i s t o be

compromise.

6

put

to

the

M l S C 22

Committee



CONFIDENTIAL

COMMERCIAL I N CONFIDENCE

Other P o s s i b i l i t i e s

f o r S i r Kenneth

Keith

Options

1

Public

recognition.

2

Vice-chairmanship

3

Chairmanship

4

A wider



o f GEC.

of Cable

aerospace

f

and W i r e l e s s .



role.

Comment

K e i t h wants p u b l i c r e c o g n i t i o n : he

i s not t o be seen as having

Other The

appointments

could

be p a r t

probably

negotiation.

The

Chairmanship

but

extremely

The

new C h a i r m a n h a s t h e t a s k

important

a changed view

crucial and

Other M i n i s t e r s of Cable

many o f t h e q u a l i t i e s

the

could

recognition.

i s not

about i t .

i s a much s m a l l e r j o b ,

f o r t h e next

of swinging

overseas



t o u s by S i r A r n o l d

may h a v e b e e n a n x i o u s

and d i f f i c u l t

with

Royce.

i f t h e IMD p o s s i b i l i t y

and W i r e l e s s

manage a s a l e o f s h a r e s

Keith

at Rolls

on d i s p o s a l s , t o c o n d u c t

negotiations

i t e v e n m o r e i f

of that public

falls

for

to

failed

want

o f GEC h a s b e e n o f f e r e d

Vice-chairmanship

Weinstock, but t h i s

he w i l l

two y e a r s .

a hostile very

board

round



d i f f i c u l t but

Governments about

concessions,

i n Hong K o n g a n d t h e UK.

Keith has

f o r a job of t h i s

kind.





b e one o f t h e two p r o p o s e d G o v e r n m e n t n o m i n e e s on

p r i v a t i s e d BAe b o a r d , b u t t h e DoT a r e a g a i n s t

direction

in British

Airways.

aerospace

i s therefore

Government



The p o t e n t i a l f o r a wider r o l e i n

limited.

Conclusion

Keith

could

important.

be u s e f u l w i t h

Cable

to reassure

Tell

S i r Arnold Weinstock that board

and t h e j o b i s

I t does not match h i s a s p i r a t i o n s b u t t h e o f f e r

help

his

and W i r e l e s s

could

him even i f he d i d n o t a c c e p t i t .

i s not wanted.

7

a Vice-chairmanship

forKeith

on