THE VICKERS SENSATION.

Auckland Star, Volume LVII, Issue 17, 21 January 1926, Page 4

THE VICKERS SENSATION.

WRITING OFF 12}£. MILUON. NOT SO BAD AS IT LOOKS. (From Our Own OorresDondent.) LKJXIJOX, December 10. The financial sensation of tilie moment i= the report issued to-day to the shareholders of " Vickers," an organisation which contains 26 foreign subsidiaries and 52 other associated concerns, and hn> about 70,000 shareholders —not far short of a six-figure number! The position in this company gives a demonstration—if this world required another:—in" the wastefulness of war, for, put shortly, the whole story has been the old Biblical one of bending swords into ploughshares and how to turn a fighting army into an industrial one without inflicting los 9 and its consequent suffering on the innocent. During the war prices were inflated beyond all measure, and munitionmaking concerns like Vickers were compelled to incur capital expenditure to adapt their greatly-expanded factories and organisation to the production of ploughshares instead of weapons of war, and with that object they secured interests in a variety of concerns at a period when prices were heavily inflated. ■Mistakes were made, and bad judgment is always expensive. As things turned out. Viekers were found not to have the special experience and capacity for management required to bring tihoir various enterprises successfully througll the most difficult industrial period known for a hundred years. Out of this evil, however, may coe|b some good. The present crisis has been faced by the directors with all that frank directness which We are accustomed to associate with British industry at its best. The company took an unusual method of going right to the root of its embarrassments. Usually a scheme for reconstruction is drawn up by directors themsolves. In this case it has been dona by independent persons. This commendable, though novel, departure from practice has resulted in some highly-interesting proposals, affecting both the directorate and the management. The scheme, already accepted toy the directorate of Vickers, has been formulated by three advisers, each of whom, in his "own line, is pre-eminent. Mr. Reginald McKennft, in banking, Mr. F. Dudley, in industry, and Sir William blender, in accountancy, form a combination of supreme ability, added to professional skill, and they have based their conclusions upon the investigations carried out by Mr. Webster Jcnkineon, Well known aeakeen and alert accountant, and who«e business acumen was of great use to the Government during the war. . ' They estimate that no less than £ 12,500,000 of capital has been lost, and they recommend that this should be acknowledged by writing down the £1 ordinary shares by two-thirde. No other form of capital is to be touched by their scheme of reconstruction —a notable example of scrup\ilons respect for the rights of preference shareholders. The actual financial arrangements are not of such importance as the recommendations made, by the committee in the reorganisation of the company, fot it is an object lesson in big business and its methods. Large scale operations in national industries, apart from international enterprises, every day seem to be 'becoming aggrandised and it behoves the investor—large or small—to take an intelligent interest in the details of this scheme. The committee first of all recommends the retirement of some of the present directors to make room for new members, and it proposes to supplement the reconstituted board by the establishment of three management boards'— namely (a) industrial board; (b) armaments and pjjipbuilding board; and (c) finance board. 'The industrial board will bo responsible for the management of the industrial section of the business and the subsidiary undertakings, and through its medium it is hoped to centralise control of the various subsidiaries and to secure unification of policy—objecte which the present aaministration of the company, according to the general impression, has signally failed to attain. The armaments and shipbuilding board will similarly supervise the business of armaments and shipbuilding, and the finance board will control all matters in connection with the finance of the company and its subsidiaries. The three exports hold out the prospect that "under efficient control and management, and provided trade does not get worse, the company should be able to continue to pay out of its net profit the debenture interest and preference dividends, and to resume dividend payments on. the reduced ordinary share capital." The company ehould "concentrate on using to the best advantage its present facilities, which are great, and, under good management, ehould be profitable." It ehould dispense! with . all officials who have not justified their engagement, cut down salaries which are not merited, eliminate waste, shut down plant, and wind up subsidiary enterprises which do not promise to contribute to the earnings of the company. In this work it is believed that the management boards "should be of inestimable value to the company," and in order that there may be ,no delay in initiating the new regime, the committee of three have, at the request of the board, agreed to continue to act in a consultative capacity until the management boards are duly functioning and some new directors are appointed. What will, Of course, shock the ordinary investor is the thought of having shares to such "astronomical" amounts written down from £1 to 6/8. But as a. financial expert reminds the shareholder ho should reflect that the value of his equity in the business will not thereby bo diminished, but will .imply be expressed in a different nura.tl™ £ COU n. t . erß - In America, for in n shareft • "" fre l uen % «P™ ed tlliil •powers of the. company- he w?H no-dividend for yeaV 8 & come ITX* «ght of a resumption of dividends neS BRITAIN'S BUTTER AND CHEESE. ond«dNo»TOber 30 of f« U ,,5 rath ;