HISTORY OF A.E.I.

There are two A.E.I history documents and a newspaper article on this page.  The historical articles are first by GEC and second by AEI, which is really a history of Siemens Brothers, whom they had taken over.

Associated Electrical Industries Ltd.  (A.E.I.)

Associated Electrical Industries Limited (A.E.I.) originated in 1929.  The Company began as a financial holding company for a number of leading electrical manufacturing and trading companies in the United Kingdom.  These included British Thomson-Houston, Metropolitan-Vickers, Edison Swan and Ferguson Pailin.  As the diversity and extent of A.E.I.'s products expanded the Company was joined by Sunvic Controls (1949), Birlec (1954), Siemens Brothers (1955), W.T. Henley (1958) and London Electric Wire Company & Smiths (1958).  In 1959 A.E.I. became a trading company and the A.E.I. symbol began to replace the brand names and trademarks of companies within the group (except Lewcos and Birlec).

Sir Felix Pole had been chairman of A.E.I. since its foundation.  His years as chairman proved difficult as he was head of a company which lacked solidarity, especially regarding its activities and board of directors.  One of Pole's primary concerns was the competition between British Thomson-Houston and Metropolitan Vickers.  Such rivalry had been present before the merger with A.E.I. in 1928 and was to continue long after.  The slump of the 1930s was to significantly affect A.E.I. and measures were taken by the company to reduce the cost of administration.  The subsidiary companies of B.T.H. and Metrovick were large exporters during the recession.  One notable activity of Metrovick, begun in 1922, was the export of electrical apparatus and machinery to the recently established Soviet regime.  This association ended in controversy in 1933 when six Metrovick engineers were tried in Moscow on spying and sabotage charges.  Intervention from the British Government resolved the affair and trading with Russia eventually resumed.

If the depression of the 1930s had affected A.E.I. unfavourably, then the Second World War proved economically beneficial for the company.  A.E.I.'s productive competence was thoroughly tested as the War progressed.  Many factories worked seven-day weeks.  The most beneficial aspect for A.E.I. was that it was primarily a war of scientific growth and innovation.  The company's electrical engineering products assisted the Government's military projects during the 1930s.  Significant contributions to the war effort included automatic pilots for aircraft , radar, guns and gun mountings.  However the continuing competition within A.E.I. was underlined by the fact that B.T.H. and Metrovick published separate books detailing their contribution to the war effort.  A.E.I.'s technical excellence was highlighted in 1935 as Metrovick and B.T.H.  became the first two firms in the world to construct jet engines (independently from each other).  A.E.I.'s greatest work during the War years was its aircraft.  In 1938, Metrovick entered into a joint venture with A.V. Roe to manufacture aircraft.  Metrovick assembled 'Manchester', 'Lancaster' and 'Lincoln' bombers for A.V. Roe at Trafford Park.

At the end of the War in 1945 Sir Felix Pole, now blind, who had been chairman of A.E.I. since 1929, was thought to be too old to lead the company into the anticipated post-war boom in electrical equipment.  A successor was to be chosen from outside the company with the resulting appointment of Captain Oliver Lyttelton in the autumn of 1945.  His major policy was to reinforce the 'higher direction' of A.E.I.  Uppermost on his agenda was to improve the productivity and "organise the company along modern lines".  Lyttelton managed to transform the holding company itself into a more proficient organisation during his first six years as chairman (1945-1951).  The Conservative victory in the general election of 1951 resulted in Lyttelton receiving the post of Secretary of State for the Colonies.  In his absence, Sir George Bailey was appointed Chairman.  During his three years in charge, Bailey expanded the company's sales and profits, his main achievement was ending the association with G.E. of America, turning A.E.I. into an entirely British company.  In 1954 Oliver Lyttelton returned to A.E.I. as the first Viscount Chandos of Aldershot.  Lord Chandos was regarded as an expansionist who was to dominate A.E.I. for a further nine years.  He became Chairman of the four groups - B.T.H., Metrovick, Ediswan-Hotpoint and A.E.I. Overseas.  Under Lord Chandos the company moved its headquarters to 33 Grosvenor Place, Belgravia, overlooking Buckingham Palace.  The most successful achievement of Chandos' second reign was at Larne in Northern Ireland with the completion of a vast works (the largest in Europe) for constructing turbines.

During the mid-1950s A.E.I. was to focus primarily upon domestic appliances and lighter engineering products.  The company discontinued its production of valves and cathode ray tubes and in 1961 merged with Thorn allowing the latter to manage its interests.  A.E.I. purchased Siemens in 1955 thus owning four independent lamp businesses: B.T.H., Ediswan, Metrovick and Siemens.  In subsequently dropping these names A.E.I.'s lamp business suffered badly.  Thus A.E.I. formed a joint company with Thorn again in 1964 and another with EMI in 1966 allowing these companies to manage its domestic appliance businesses.  1959 proved to be a boom year for domestic appliances.  Hotpoint, which had been made a separate group in 1955 with Craig Wood as chairman, helped to contribute to A.E.I.'s success in this field.

In 1957 the activities of Siemens Brothers &  Co. Ltd, and the Edison Swan Co. Ltd, were integrated under the name of Siemens Edison Swan Ltd, which was a wholly owned (as a subsidiary) by A.E.I.   In 1960 Siemens Edison Swan Ltd became A.E.I. (Woolwich) Ltd and sections of A.E.I. were rationalised to form product divisions of which A.E.I. Telecommunications Division and the A.E.I. Cables Division were established at Woolwich.

The greatest challenge faced by Lord Chandos, which had also plagued Sir Felix Pole was the restructuring of A.E.I.'s governing and functioning structures.  One of Lord Chandos' preoccupations with A.E.I. was his 'divide et impera' strategy.  His divisionalisation policy for A.E.I. was designed to mobilise the company's huge assets more effectively and to become more commanding in the markets.  After several attempts at revitalisation, Lord Chandos was still unable to prevent the eventual unprofitability of A.E.I. and its organisational problems.  The years 1960-1963 were particularly bad for him and the company as the serious problem of "overlapping and competition between the constituent companies" was never overcome.  Lord Chandos left A.E.I. in March 1963, aged seventy.  He had contributed greatly to the Company's ascent since the end of the war and, like Hugo Hirst of GEC, believed in the policy of 'Everything Electrical'.  The legacy he wished to leave for his successors was one of a "streamlined company" which would "survive and prosper in the highly competitive world" which challenged it.

In 1966 A.E.I. had 95,000 employees staffing 67 factories in all five continents and had an annual turnover exceeding £250,000,000.

The two men who were to dominate the Company until 1967 were Sir Charles ('Mike') Wheeler and Sir Joseph Latham.  In 1964 the Company's problems were focused upon in a paper entitled 'The State of the Company'.  The Wheeler-Latham regime set about altering the hierarchical structure of the company but progress was minimal.  During the first two years of the Wheeler-Latham reign, profits were encouraging but it was the disastrous year of 1966 which was to bear more significance.  The Company had been in need of drastic revitalisation and needed decisive action by the people at the top.  In 1967 GEC's Arnold Weinstock and the Chairman of the Industrial Reorganisation Corporation, Ronnie Grierson, proposed an instant solution to the company's problems.  This was to culminate in the historic £120 million bid by GEC for A.E.I., resulting in the merger on Thursday, November 9th, 1967.

Go to the GEC History page

BIBLIOGRAPHY

'Anatomy of a Merger: A History of GEC, A.E.I. and English Electric' ,
R. Jones & O. Marriot, (1970),
Jonathan Cape, London. ISBN 0 224 61872 5

'The Memoirs of Lord Chandos'
The Bodley Head Ltd., (1962)

Taken from the Marconi history files and an an article on the review of achievements by A.E.I. - please go the the GEC/Marconi web site for more information.

A.E.I.
Telecommunications Group
Review of achievements 1908 - 1968

INTRODUCTION
OUTLINE HISTORY OF BRITISH COMMUNICATIONS

It was ninety one years ago (1676) that Alexander Graham Bell filed his application for a U.S. patent covering all the principles of telephone transmission.  From that one single patent, spanning nearly two generations, has sprung a multitude of "means of making voice and spoken word audible through the electric wire, to an ear hundreds of miles distant".

Following upon Bell' s initial discovery and the realisation that the telephone had arrived, came a flood of ideas inventions and perceptions.  The most important of which was the realisation that to allow the telephone to become a truly commercial proposition., a central "exchange" would be required; to which each telephone receiver would he connected ensuring easier control of the system.  The first fully equipped commercial exchange opened in 1873 at New Haven, Connecticut.  The practical development of intercommunication by means of the telephone was underway.

Companies appeared throughout the United States and to a lesser extent in Great Britain, to develop and utilise the new means of communication.  It soon emerged that only two, the Bell Telephone Company and the Edison Company, were to have any real part in the story.  Then in 1880, realising that they were unified in heir aims, they amalgamated as the United Telephone Company.  It is worth noting that it was the Bell Telephone Company that established the first exchange e in the United Kingdom, giving service to a total of 8 subscribers.

In the U.K. the General Post Office were swift to realise the potential of the telephone.  They were worried however at the timing of its arrival as in 1870 the had spent vast amounts of money in extending a telegraph system throughout the country.  Now, only a few years later, came a rival to that system.  The Post Office with their usual aplomb, decided to use the telephone to supplement their telegraph system, and to gradually replace the latter.  By 1892 the Post Office was maintaining 35 exchanges serving about 5000 subscribers.   This was not a great number and only mildly compared with the installations of the United Telephone Company and other companies throughout the country.  London alone for instance had 1338 subscribers us early as 1882 run by the United Telephone Company.

In 1889 the United Telephone Company and the smaller companies decided to merge their interests under one company, and in May the National Telephone Company emerged.  Now the only competition was between the Post Office and the National Telephone Company.  A rough comparison using 1898 figures shows that the Post Office had a total of 49 exchange installations whereas the National had responsibility for 853 exchanges totalling over 120,000 lines.  However there were two factors which slightly nullified the extent of the National's apparent advantage.  In 1892 the Post Office under a Government Act had the right to purchase all the existing trunk lines in the country thus restricting: the private companies to operate only in local areas.  The second obstruction against the private companies was the question of way leave - only the Post Office had the .right to secure land upon which to build an exchange or under which to lacy cables.

The trunk system under Post Office control expanded at a reasonable rate in the effort to give the country a comprehensive long; distance service: links between London and the major cities in Scotland, and between places such as Leeds and Glasgow and Belfast and Dublin were provided and even in 1893 a link between Glasgow and Belfast was opened utilising a submarine cable passing from Portpatrick to Donaghdee.

However during the last ten years of the nineteenth century and despite technological development, the telephone service in this country was one which only aroused frustration.  Continual differences of opinion between the Post Office the private companies and the local authorities (who also felt they ought to have a say in the running of the system) had all combined to prevent the obvious solution of unified control of the telephone system.  Discussion, arguments, debates in Parliament, selective commissions punctuated the next few years as the rumpus over who did what with the telephone system continued unabated until the new century, when it was decreed, at last, that the Post Office was to become the sole operative body and completely in charge: of the entire telephone system throughout the country.

The little private companies were beaten, as were the few local authorities, with the exception of Hull, (who continue to be independent even today) and gradually they all began to sell out their interest in the telephone to the G.P.O.  Even the mighty National Telephone Company came closer to settling its differences with the Post Office when in 1901 they agreed on a plan for the system in London.  London was to be divided into three zones, one to be worked by the National Telephone Company, one under the auspices of the Post Office and the third to be jointly controlled by the company and the Post Office.  The end for the private companies was in sight and between 1904 and 1911 the National Telephone Company in fact gradually transferred all its installations to the Post Office and by the 31st December 1911 the entire complex organisation of the telephone system in this country was in the hands of a sole controller, the Post Office.  Part one of the history of the telephone in this country was over.

1912 saw the curtain raise upon the second stage of the history and the modernisation and controlled development of the national system by the Post Office.  However other events were imminent and results of the monopoly had to wait until after the Great War.

As far as actual equipment was concerned pre 1912 witnessed the supplying of British exchanges by foreign manufacturers mainly the Americans and the Swedes (The American Bell Company owned a factory in Antwerp).  But following the complete takeover by the Post Office it was announced that all future requirements would be met by British Manufacture.

Manufacturing companies did exist in Britain at this time but only on a limited scale, and most of them were subsidiary companies of the large American or Dutch concerns.  Exceptions: to this were the Peel-Conner Telephone works formed by the General Electric Company, and the Automatic Telephone Manufacturing Company formed basically from what was a small cable concern in Liverpool.  But with the P.O. declaration that British exchanges were to be supplied by British equipment more electrical companies prepared to move into the world of telephone.

It was the Automatic Telephone Manufacturing Company who first really took up the challenge of the automatic exchange in this country when they purchased the British patents of the American Strowger system which had been experimented with in the United States for a number of years.

The Post Office decided early on that some form of standardisation of equipment would be received if the national, system was to be operated efficiently and economically, but which system....?  So one of their earliest decisions was that it would investigate and give extensive trials to all systems, manual and automatic.  Thus in 1912 at Epsom the Automatic Telephone Manufacturing Company installed the first fully automatic exchange in this country, and closely followed this with a 900 line automatic exchange also based on the Strowger system
at the Post Office Headquarters in St. Martin-le-Grand.  Here the P.O. and A.T.M. engineers could study the mechanism and the performance of the system and gauge to what extent automatic working would operate in this country: how would people react to the new method of obtaining a call, without the cheery voice of the local operator to help one out?, how much would it cost?  All sorts of questions were asked and answers sought, slight modifications made here and there, all in an effort to find the answer they were looking for.  Would automatic working benefit the P.O. system?

Other systems apart from the A.T.M. Strowger type were beginning to appear as well.  The Lorimar system was introduced at Hereford in 1914 and although it was efficiently operative for about eleven years it was the only one of its type to be installed in this country.  Another system to gain the close attention of the Post Office was that introduced the Western Electric Company (subsequently Standard Telephones & Cables Ltd.) and called the Western Electric Rotary System, a more complex system and using entirely different methods from those found in the Strowger systems of the A.T.M.  The first exchange to employ the Rotary system was opened in the shadows of the Great War (First World War) in 1914 at Darlington.

Siemens Bros. decided in 1910 to enter into the field of telephonic communication, and began to actually produce equipment by 1912.  They too devised an automatic system, based mainly on the Strowger system and the first automatic exchange of Siemens Brothers was brought into operation in Grimsby in 1918.

With the advent of the Great War the major telecommunications firms and the Post Office had to cease their considerations of the various automatic systems available and their followed a four year delay in the development of the national network.  The companies turned their attention to the war effort and designed, developed and, produced ingenious aids to the allied cause, such as mine detectors and submarine detectors, and of course introduced the field telephone into the front line and other methods of signalling.

However, it was during the days of the war that the Relay Automatic Telephone Company came into, being, producing a automatic relay system devised by the Swede, Betulander.  In this system every function of the exchange was performed by a relay: the selection of numbers, ringing and disconnection.  With this method, it was clamed, wear of any kind was minimal because of the lack of moving parts.

When the war finally came to an end, both the industry and the Post Office were faced with the tremendous problem of bringing the telephone system of the country up to date; it had been at a standstill for 5 years, exchanges were underequipped, new exchanges were required and people were finding it hard to believe that the telephone would ever be efficient.  But here was a challenge and an opportunity for the industry and the years and events that followed the war clearly showed that the companies and the P.O. were prepared to take up the challenge.

The Post Office had decided that Leeds was to be the first large it to own a complete automatic system, and this was opened in 1918.  The equipment was the Automatic Telephone Manufacturing Company's Strowger system using 5-digit dialling and equipped for 6600 lines (making it the largest of its kind in Europe).  While Leeds was being installed A.T.M. equipped other fair-sized towns with the system.  1915 saw the opening of Newport, Monmouth; followed in 1916 by Portsmouth, Paisley and Blackburn.  Other equipment, too, was seen being installed throughout the country; Dudley (1916) was the second town to be served by the Western Electric Rotary system; Fleetwood was supplied with the Relay Automatic Company' s system and Stockport followed Grimsby in 1919 by having the Siemens Bros. Strowger-type system.

But generally the post-war years were quiet times for the industry as the Post Office was still deliberating about the type of equipment it intended to standardize on.  In fact between 1912-23 the Post Office: installed a total of 18 automatic exchanges of various types including in 1923, a 3,200 line exchange, of Siemens Bros. manufacture, at Southampton.  So, while the P.O. investigations continued the British Industry realised that non-participation in the export market, which had suddenly shown itself as being telephone conscious, and a willing market for those companies prepared to leave these shores would mean a virtual American monopoly of the world telephone system. Out went the salesmen and the industry began to obtain intensely valuable experience in solving other countries problems.

G.E.C., Western Electric and Siemens Bros. stared mostly within the realms of the British Empire.  G.E.C.; supplied exchange equipment went to Palestine, Jerusalem and India, and also smaller contracts were won from Siam, Eire and even China.  The first Siemens Bros. venture overseas was to supply a 1,040 line semi-automatic exchange to Port Adelaide in South Australia in 1916.  Their first fully automatic exchange installed outside this country, was opened in 1923 at Indian Head in Saskatchewan, in Canada, followed in the same year by a 6,000 line exchange at St. John's in Winnipeg.  Also opened in 1923 was another Siemens Bros. automatic exchange in South America - a 3,000 line auto-exchange at Valparaiso, Chile.

A.T.M. also entered the South American market in a big way by aiding the United River Plate Telephone Company to effect the change-over from manual to Stronger 'step-by-step' working of the Buenos Aires network.

1923 also saw the first transatlantic call between leading British Post Office Personnel and those of the American Telephone & Telegraph Company, whose equipment operated the transmission.  Then the telephone entered a new stage of its life as an international means of intercommunications.

At home the Post Office finally decided that automatic equipment had a future and would be suited to the particular problems of the British Isles.  It was decided that London was to be tackled first as the kingpin of the modernisation of the national system and plans were drawn up to deal with the problem of the paucity of the telephone situation in London.  It was obvious that a system involving a complete overnight changeover was not desirous without causing undue and possibly astronomical problems; a system that would exist side by side with that which already existed, and the gradual take over had to be sound, and it was to this end that P.O. engineers together with those of the industry put their ingenious minds.  It is worth noting that one of the most outstanding, yet untried schemes put forward to the P.O. was that dreamed up by two Siemens Bros, Engineers, Laidlaw & Grinstead.  In their proposal, London was to be divided into nine sections, (the digit '0' giving access to an operator), each consisting of about 100,000 subscribers.  To obtain a number in any of the regions one would dial the first digit indicating the region desired; a second digit to direct the call to the particular exchange required and then for remaining digits to gain the actual subscriber required.

The P.O. paid very close attention to the similar problem confronting the New York City authorities who were faced with the task of re-equipping the most densely telephone large area in the world.

They had decided to adopt the Bell organisations 'panel' system, and with it the first use of the 'dial' as we know it today.  A 9,000 line exchange in Pennsylvania was the first to utilize the dial in 1922.

It seemed at first that the P.O. was in favour of adopting the panel, system for the London network and in fact plans were made for Blackfriars to became the first exchange using this type of equipment.  It was at this critical stage that the industry decided to act and immediately protested to the P.O. that if the Panel system was adopted the majority of equipment would have to be imported, and this at a time when employment in this country was on the increase.  The industry laid forth their own plan for London, incorporating what is known as the 'Director System'.  The P.O. set forth on further extensive investigations and, after many months, were finally convinced that the Director system based on the Strowger method offered all the essential needs for the London network.

An agreement was drawn up whereby all patents covering the system were pooled and the P.O. called upon A.T.M. whose idea the director system principally was to supply 55,000 exchange lines and the other manufacturers, G.E.C. Siemens Bros. and Western Electric contracted for smaller quantities.

Various improvements to the agreed system was submitted for P.O. approval for instance, G.E.C. put forward their 'controller' system and Siemens Bros. their developments of 'translator' and the 'by-path' system.

It was from this one decision that a gradual standardisation on a very thorough scale came into being.

Following on from this decision to standardise on equipment the P.O. called together the main contractors, A.T.M., G.E.C., S.B. and Western and  formed the Bulk Contract (B.C.C.) Committee under which the contractors would supply equipment, allocated in terms of the number of lines at an agreed price level.  In 1928 Ericsson Telephones Ltd. joined the B.C.C. and a fresh agreement was drawn up based on the lowest quotation from the five parties.  There now existed this close co-operation between the industry and the Post Office which, had it a lasted twenty five years before would have seen the growth of the national system far in advance of what it is now.   Further committees linking the P.O. and the industry were formed in the years following the setting up on the B.C.C., such as the British Telephone Technical Development Committee (B.T.T.D.C.) to control, the technical policies, development and technical routines of the manufacturers and the Telephone Development Association (T.D.A.) to promote general interest in the telephone.   Holborn, the first exchange in London to be operated by the Strowger Method of A.T.M. was opened in 1927 and this was quickly followed by others: Metropolitan, Monument, National, Hendon and Amherst were supplied by A.T.M.; Croydon by G.E.C.; Sloane, Bermondsey, Temple Bar, Langham and Fulham by Standard Telephone Co. and Maida Vale, Western, Beckenham by Siemens Bros.

The industry by the middle twenties was also having considerable success overseas, with A.T.M. supplying large cities such as Tokyo, Canberra and Sydney and Standards introducing their Rotary System into Shanghai.  Siemens concentrated a lot of their effort and development in introducing automatic exchanges into South Africa and, in fact, in just over two years in the early thirties 13 automatic exchanges equipped for 37,000 lines were added to the system and by 1936 there were 36 automatic exchanges serving more than 80,000 lines.

The telecommunications industry in this country had now firmly found its :feet and so the telephone was rapidly being recognised throughout the world as a necessary and useful piece of equipment rather than an eccentric luxury, the industry kept pace in being able to supply its need.  Trunk systems and carrier systems, linking all parts of the country and all corners of the globe were developed and opened, and the introduction of radio telephone brought ships closer to shore and those almost inaccessible places of the world a lot nearer to the civilised parts.  All this, and just over half a Century had passed since those exiting days in Boston., Mass. when Alexander Graham, Bell made his "discovery....... in regard to the transmitting instruments".

The twenty years or so succeeding the 1918 Armistice were undoubtedly the most exciting and rewarding days in the history of the te1ecornmuniationz industry in this country and it might be of interest to look briefly at the achievements of this companies overseas during this period.

Naturally the second World War l939-l945 had a tremendous braking effect on the industry as it had twenty five years before, but again, as then, the industry played its own major part in the allied victory.  Production of exchange equipment once main was completely suspended and fresh machines to manufacture equipment; for the War Office and the armed forces was installed.  In 1945, peace came at last, and the industry once again prepared itself for what was to come.  Once again, as in 1919, the country telephone system had fallen behind and a great may places were under equipped or had an exchange that needed replacing.

One of the best ways of seeing to what extent the telephone has prospered in this country is to look at the following table which shows the number of telephones in this country and the number of telephones for every hundred of the population between the years 1912 - 1966.

In the past decade or so British Telephone growth has been been generally behind that of most other industrialised nations.

The next table compares international penetration and rates of growth and indicates that the size of the British system has been declining relative to a number of others.

Source - The Worlds Telephones, American Telephone & Telegraph Co. New York.

An Introduction to A.E.I. and their role in the
Development of Automatic Telephony

Associated Electrical Industries was formed in 1929 as a financial holding company for a number of leading electrical manufacturing and trading companies in the U.K.  These included British Thomson-Houston, Metropolitan Vickers, Edison Swan and Ferguson Pailin - names well known to electrical engineers all over the world.  Later its scope and range of its products grew as Siemens Brothers and Co. Ltd, L.T. Henley' s Telegraph Works, London Electric Wire Company & Smiths, Sunvic Controls and Birlec joined the group.

Siemens Brothers became a public company in 1880 under the name of Siemens Brothers Co. Ltd., and in 1954 was merged into the A.E.I. group of companies.  In 1957 the activities of Siemens Brothers Co. Ltd.: and the Edison Swan Co. Ltd. were integrated under the name of Siemens Edison Swan Ltd, which was wholly owned as a subsidiary by A.E.I.  In 1960 Siemens Edison Swan Ltd. became A.E.I. ( Woolwich ) Ltd. and sections of the A.E.I. group were rationalised to form product divisions of which the A.E.I. Telecommunications Division and the A.E.I.  Cables Division were established at Woolwich.

By 1966 Associated Electrical Industries had 95,000, employees staffing 67 factories in all, five continents and having an annual turnover exceeding £250,000,0000.

A.E.I. - G.E.C.
In November 1967 the boards of Associated Electrical Industries Ltd., and the General Electric Company Ltd., agreed to merge their two companies into a single unified organisation. There will be considerable bent its from the combination of the research, development, production and marketing resources of these two great British companies.  In particular, a logical and self sufficient alliance has been formed in the area of Telecommunications which was the largest mutual activity of the two companies and which has been largely complimentary.  The new group can now offer a full range of transmission equipment for cable, radio and microwave networks, also for telephone exchange equipment including Strowger, Crossbar and Electronic systems.  Overall, a group has been created having an annual turnover for a wide rare of products of about £450 million.  Obviously a group of this size can provide an even better service to its customers in world wide markets.

Siemens Brothers
Siemens Brothers was founded in 1858 by William Siemens with the primary object of making Telephone Cables.  Since then the pioneering work of the company in such diverse fields as steel making, electrical machinery, lighting, turbines telegraph, land and submarine cables, and telephone equipment of all types, has established in the A.E.I  amalgamation of companies one of the major industries in Britain today.

The early days
Siemens Brothers had supplied certain apparatus to the various telephone administrations from the earliest days but it was not until 1911 that the telephone manufacturing organisation of the company was established.  Most of the British telephone operating companies had been amalgamated into the National Telephone Company which operated under a government licence due to expire in 1911.  Western Electric was the sole supplier of their telephone apparatus and the expiry of this licence was the opportunity for the company and other British firms to step in.

In fact, the decision to expand into telephone apparatus manufacture was made in 1910 and within two years the new telephone apparatus manufacturing building was ready and a very advanced staff had been recruited under the well known E. A. Laidlaw and W. H. Grinstead, both from the National Telephone Company.

Siemens & Halske, one of our associate companies until the first world war, had acquired the Strowger patent rights and E. A. Laidlaw seized the opportunity to develop an automatic exchange system from basic equipment information provided by Siemens & Halske.

Of the devices in this pre-war British equipment was the original Siemens knife edge relay.  This was first introduced in 1911 its essential features were embodied into the B.P.O. standard 3,000 type relay of 1931.  Another device, the development of which in the early 1930's was to have far reaching importance to the company, is the ten point pre-selector or uniselector.  This uniquely designed switch was first developed in 1901 and was used extensively as a call distributor to disengaged operators on manual or semi-automatic exchanges.  The ten point uniselector was used on the pre-selector racks of the companies first P.A.X. installation in 1913 at Kings Cross Hospital, London and later featured in the companies automatic exchange equipment of the 1920's.

The first public automatic exchange supplied by the company to the B.P.O. was a 1,300 line exchange opened in Grimsby on September 1918.  This exchange and all later exchanges of the company's own development, employed open single-sided racks which became the standard practice for all electromechanical equipment racks.  The switching system was essentially a Strowger step by step system with 10 point first and second Pre-selectors driven by machine generated pulses and 100 point two motion selectors for the group and final selectors.  In its mature form this original Siemens Brothers system was called the No. 16 system which became known through out the world for its simplicity and reliability, and several, of the equipments installed in the 1920's are still in use today.

The Director System
In 1922 A.T.M. informed the B.P.O. about a development by A.E. Co. of Chicago who had grafted on to the Strowger system a call storing and translating scheme.  This system was known as the Director system (the word Director was the registered trademark of A.T.M. Ltd) and as speedily adopted by the B.P.O. for London and other large cities.  To facilitate the introduction of the Director system into the U.K. an agreement was made in 1930 between the B.P.O. and the British manufacturers for a collective bulk supply arrangement in which the patents owned by the various contractors were to be pooled.   The apparatus supplied would eventually be standardised by a committee (B.T.T.D.C.) presided over by the B.P.O.

The No. 16 System
On the introduction of the company's No.16 system, orders for automatic telephone equipment were received from all over the world as well as from the United Kingdom.  The first No. 16 equipment was installed at Valparaiso, Chile in May 1923 and in the pioneering days thereafter the sales record for No. 16 equipment resembled the battle honours of a famous regiment.

An impressive number of new territories were being served and the company was continually breaking all records in exchange sizes and in numbers of lines simultaneously cut over.

The Neophone
In the late 1920's the company realised that although the attenuation and distortion of long distance telephone trunk lines could be improved by the introduction of repeater amplifiers into the network, further improvement as limited by the performance of the "candlestick" type of telephone instrument which by then had been in general use for 30 years.  In co-operation with the B.P.O. the company set about designing a new telephone instrument.  The aims of the work were to design a handset instrument with improved articulation and frequency characteristics.  An important step as the reduction of the effective mass of the transmitter diaphragm assembly to about one tenth of that of the solid back transmitter.  Essential for a handset instrument was the re-shaping of the carbon granule chamber to obtain a uniform granule pressure on the electrodes irrespective of the orientation of the hand set.  To undertake this work great strides were taken in the art of electro-acoustical measurement which supplemented the traditional use of speaking and listening tests and which enabled resonances to be traced to the unnecessary air spaces causing them.  The use of new powerful permanent magnet materials nearly doubled the sensitivity of the receiver and the increased sensitivity of the telephone as a whole necessitated the fitting of anti-sidetone coils for the first time in a subscribers instrument.

Constructional innovations embodied in the new telephone, which incorporated the company's new cam dial, allowed, the production processes to be regulated on a more scientific basis.  The new handset telephone was named the Neophone and this instrument which represented an almost revolutionary advance on the "candlestick" type earned the reputation of being the most efficient telephone in the World.

51 Type Equipment
In 1932 after consultations between the B.P.O. and the contractors a new standard exchange equipment was introduced known as Siemens' Brothers 51 Type equipment and later styled by the B.P.O. as the pre-2000 equipment.  This equipment  embodied the principle of open single-sided racks that the company had used since 1914.  The switches and relay sets were to be supported on pressed steel shelves and the relays used were the new 3000 type, the efficient magnetic circuit of which owed much to the original Siemens knife edge relay.  The company's original 10 point uniselector was replaced by a 25 point uniselector and the company' s new trunk distributing frame was to replace the older type which was introduced for Director exchanges.

Long distance telephone service
At this time the telephone industry was becoming deeply involved in the improvement of long distance telephone services.  Until the early 1930's all trunk (toll) calls were handled on a delay basis by two or more telephonists.  Delay working utilised the trunks efficiently, but in order to offer a better service some administrations began to offer a "trunks on demand" (C.L.R.) service.  The number of routes available wore frequently limited by the physical size of the outgoing multiple on the manual board.  Furthermore, although the cost of speech channels was Steadily decreasing it was clearly expensive to run a system in which the trunks were segregated into small groups each controlled by a telephonist.

Automatic switching was the answer to this and the company's new cordless trunk switchboard was designed to provide access to as many outgoing trunks as necessary via the contacts of remote automatic switches under the control of the telephonist.  The remote automatic equipment freed the telephonist from the business of watching for free trunks and the switchboard as greatly simplified by the elimination of the large jack fields with their associated cables.

Cape Peninsula
The first of the major contracts involving automatic trunk switchboards was that for the South African Cape Peninsula telephone network in 1933.   The network, which served the whole of the Peninsula, consisted of the central exchange in Capetown and a considerable number of satellite exchanges.  The company's contract was for the manufacture of automatic equipment required to convert this large area from manual working to automatic working.

The amount of "up to the minute" equipment supplied was impressive.  The cordless trunk switchboard was the first of its kind anywhere in the World, the Neophone was the most efficient telephone in the World and the 51 type equipment was the newest equipment adopted as standard by the largest telephone administration outside of the U.S.A.

The No. 17 System
In the early 1930's the company's extensive studies into alternative switching systems revealed a need for a selector with more contacts on its bank capable of a faster outlet search speed and subject to less limitations in the size and arrangement of its outlet groups.  By its use economies in exchange and junction plant were foreseen together with the possibilities of improved traffic facilities.

Work was started on the design of the now well known high speed relay for uniselector.  The new rotor uniselector had 16 arcs with 52 contacts per arc, allowing Subscriber circuit switching to 200 or even 250 outlets at an operating speed of 200 outlets per second.  A new high speed relay was required for outlet testing that speed in order to interrupt the drive circuit of the motor uniselector.  Existing telephone relays had a response time in the order of 10-20 milliseconds but a relay was wanted with a response time in the order of only one millisecond.  This work resulted in the development of the No. 73 relay which was robust, simple to adjust, virtually free from contact wear and held its adjustments almost indefinitely.

Motor uniselectors were first installed at the North (London) director exchange in 1935 where they were used as line finders.  While this was only one of numerous applications, the equipment served demonstrated the speed, simplicity, flexibility and economy of the new high speed motor uniselectors.

Melbourne Trunk Exchange
Melbourne trunk Exchange was a complete system based on the rotor uniselector.  The trunk routes included carrier frequency channels linking Melbourne to Sydney, Adelaide and Hobart.  The Hobart trunk route was served by coaxial cable laid across the Bass Straits by the company in 1935 and which finally linked up all states of the continent.

The first part of the Melbourne automatic trunk exchange was opened in 1940.  The equipment marked an advance on the Capetown system in that motor uniselectors were employed for the main switching functions and the company's new development of voice frequency signalling was used for the first time.  The trunk traffic originating in Melbourne was handled on a semi-automatic basis while practically all of the trunk traffic coning in to Melbourne was dealt with by automatic equipment.

The company's novel voice frequency signalling equipment was designed to work an area the size of England over a mixture of phantom circuits, ordinary physical circuits, repeatered circuits and superimposed telegraph trunks, nearly all of which being open wire lines.  This demanded a very comprehensive 2 VF signalling system together with an efficient supervision routine which reduced the time taken to establish and release connections.  The 2 VF signalling system converted D.C. pulses and ring down signals into trains of 600 Hz or 750 Hz tone pulses - frequencies recommended by the C.C.I.F. in 1938 for signalling over carrier type trunks.  This enabled calls to be automatically set up at distant exchanges under the full control of the originating operator with the advantage that the distant operator was no longer needed and therefore clear down delay could be avoided.

This system together with the speedy trunk switching capability of the motor uniselector gained a very high revenue earning occupancy for the Melbourne trunk lines.

The No. 17 system post war
The company's No. 17 system was among the first of the common control systems and separated the functions of number registration and outlet selection in a unique fashion; its simplicity of design greatly eased the problem of fault tracing.

The M.U. equipment was redesigned after the war to bring it up to date as a system having a long life, a low fault liability, and requiring little maintenance.

The No. 17 equipment was widely installed in the years after the war.  The first installation being: for the South African Railways and Harbour Board at Bloemfontein, followed by a public exchange at Bulawayo and many others scattered throughout the world.  The most important private installation in the U.K. was that for the Port of London Authority in the London Docks.  Today the company's M.U. switches form the backbone of the U.K. subscriber Trunk Dialling system, in fact, in London alone approximately 30,000 of these selectors serve the nations most important trunk routes.

The motor Uniselector switch has been incorporated both in A.E.I. and other trunk systems throughout the world and is the current standard system in South Africa for all local and trunk switching purposes.

Trunk Switching and S.T.D. (D.D.D.)
Further developments in the mechanisation of trunk switching were featured in the Canadian Toll switching network  built up from1951 onwards.  In the A.E.I. installations the main switching functions were performed by the motor uniselector.  At first a 2V.F. signalling system similar to that in Melbourne was used but most of it was later changed to standard Canadian E and M signalling to simplify inter-working with the American network.

The first step towards providing D.D.D. service was the provision of register Translators (Senders) which extended single operator control.

To provide means of automatically determining the calling number, the company designed the automatic number Identification (A.N.I.) equipment which was first installed at Lethbridge, Alberta in December 1963 where the A.N.I. equipment passes the calling number into the Bell System C.A.M.A. machine at Calgary.

In January 1966 a turning point in automatic toll snitching was reached with the installation of the company's Centralised Automatic Toll Ticketing (C.A.T.T.) at Swift Current,  Saskatchewan.  This installation finally replaced the functions of a toll operator for in the setting up and recording of D.D.D. toll calls.  The equipment automatically routes calls during set-up and provides the relevant information on punched tape for processing detailed customers accounts by business accounting machinery.  The installation is located between the incoming toll access trunks and the automatic trunk switching equipment and can be added to M.U. Type toll exchange when D.D.D. facilities are required.

The A.E.I. equipment mentioned earlier is provided for local exchanges and can be equipped in any local exchange with sufficient toll traffic to justify it economically and will work into any toll exchange equipped for D.D.D. traffic using CATT or C.A.M.A equipment.  Already well over 5,000,000 lines of A.N.I. equipment have been supplied and the number of C.A.T.T. centres currently in service or being installed is equally impressive.

Time Division Multiplex
In the early 1950's it was obvious that the efficiency of the electromechanical telephone exchange rind been developed to a point where radical improvement in equipment or services demanded a radical change in technique.  The advance in electronics, particularly the advent of the transistor, offered new techniques for telephone switching and in 9152 the company formed a special development group to study the application of these techniques.

The group studied Time Division Multiplex (T.D.M.) switching using delay line storage with 100 microsecond and 1 millisecond lines but concentrated most of its attention to the application of electronic common control to the company's M.U. system.  As early as 1953 a small T.D.M. system model using delay line storage was built by this group, but much work had to be done before a large scale model could be contemplated.  In fact, so much research work was required to adequately explore the possibilities of electronic switching systems within a reasonable time scale that the B.P.O., the company and the other principal British manufacturers of switching equipment decided to co-ordinate their research efforts.  Thus in 1956 a combined research and development unit known as the Joint Electronic Research Committee (J.E.R.C.) was formed with a joint development program which included a high speed and low speed T.D.M. system.

Electronically controlled motor uniselector
At the same time the company was still proceeding with the electronically controlled motor uniselector system E.M.U. and by March 1960 a working prototype had been produced and tested.  This system, which combined the advantages of electronic common control with the well proven principles of space division switching, incorporated many significant advances in trunking and technique and was commercially very attractive.  However, the dry reed relay, which offered compatibility with transistorised circuits, was becoming a commercially viable proposition.

The company's management reasoned that to ensure many years of planned marketing life for a new exchange system, it was essential for it to be compatible with fully electronic systems and with existing telephone systems, and therefore a more compatible switching element was needed.  Effort was concentrated to combine dry reed switching with electronic control, in effect, recasting the proved technique of the E.M.U. system in terms of cross point switching based on the dry reed relay.  The new system was to become the company's Reed-Electronic Exchange system known as REX.

A prototype design of this system was worked out by June 1960 and offered to the Joint Electronic Research Committee for development in parallel with the T.D.M. Systems.

T.D.M. versus dry reed
Meanwhile the investigation of the T.D.M. techniques had led in 1959 to an "electronic level" on the P.A.B.X. in the B.P.O.'s Dollis Hill Research Station.  Then in 1962 came the opening of the projected 3000 line T.D.M. exchange using 100 pulse channels switched by cold cathode tubes at Highgate Wood, London.  This was the first electronic exchange of its type in the world to operate in a public network, but because of manufacturing difficulties only 800 lines were eventually put into service.

These and the projected field trial equipment for Goring and Penbury established the practicability of T.D.M. exchanges but exposed a number of short-comings which were fundamental at that time.  Briefly an improved T.D.M. system required simpler and cheaper line circuits - a better quality "transmission path" - better provision for growth - a greater understanding of maintenance problems - better components and a great reduction of overall costs.  Furthermore the trials emphasised the need for compatibility with existing telephone systems.

By mid 1963 it was clear that problems posed by T.D.M. exchanges could not be overcome within a reasonable time scale and therefore the various systems were returned to the laboratory.  The participants then focussed their full attention to the dry reed space division system in two projects.  One project was for small exchanges not ultimately exceeding 2,000 lines and having a low speed electronic common control.  The other project was for exchanges exceeding 2,000 lines with high speed electronic common control.

Leighton Buzzard
A.E.I. actively participated in the large exchange project and together with the Automatic Telephone and Electric Co. Ltd. and Standard Telephones Cables Ltd. supplied the first large space division electronic exchange in the U.K. at Leighton Buzzard.  The initial capacity of Leighton Buzzard was 3,000 local subscribers with 150 incoming and 130 outgoing junctions including 60 circuits to and from Luton to provide S.T.D. (or D.D.D.) access to the rest of the country.

A.E.I had the overall responsibility for the exchange design and supplied the switching equipment and the majority of switching control.  A.T.E. supplied the rack frameworks (their 5005 Crossbar Practice), registers, senders and junction apparatus and S.T.C. supplied the electronic common control equipment.

This exchange became the proving ground (rather than a prototype) for U.K. reed-electronic space division developments of it's type.  Although equipment for the small exchange project was the first to be put into public service for the B.P.O. trails, the original work on reed-electronic switching was carried out for the Leighton Buzzard exchange.  The new technology marked a turning point in the history of telephone exchange development in Britain enabling new demands on switching equipment to be met while fully interworking with existing equipment and networks.

Nomenclature
Leighton Buzzard was originally intended to be the production system TXE1 (to use the B.P.O. nomenclature) however, the concepts upon which it based led to the specification and successful development of more advanced systems.  These are TXE2 for small exchanges such as that at Ambergate and TX3 for large exchanges such as the B.P.O's Royal exchange in London.   TXE4 is the intended successor to TXE3 and will in fact be a cost reduced version of TX3 and similarly TXE5 will be an advanced and cost reduced version of TXE2.  The range is competed by TXE6 which is a reed relay group selector for extending existing electro-mechanical equipment.

Having pioneered the work on the TXE design the company are able to offer this system overseas as the A.E.I No. 70 REX system but in parallel with this A.E.I. has developed the No. 18 REX system to meet the more diversified needs of overseas administrations.

Although the REX No. 18 system is a large exchange system somewhat similar to TXE3 in specification it is radically different to technology and overall design concept.  This system has been referred to as the generalised REX system in that it provides the complete flexibility required for is general application to all types of switching function, for any kind of customer service and for both public and private administrations in all parts of to world.

The REX No. 18 system
The A.E.I. No. 18 system is not merely a reed relay system, it is a completely new concept of telephone exchange switching.  This concept is based on wholly new methods of speech path trunking, new methods of securing control equipment against failure and new methods of recording data both for the purposes of automatic accountancy and for call tracing or fault analysis.

The flexibility in the design permits the extension of existing Strowger exchanges with standard units of REX equipment which can ultimately be increased to completely replace the original equipment at the end of its useful life.  Another aspect of the flexibility of the REX system is the ability to disperse the switching equipment remotely from a central control complex.  The control operates these dependant exchanges over D.C. or P.C.M. transmission links and centrally positioned P.C.M. switching equipment can provide the interconnection between the remote exchanges.

It is anticipated that the progressive introduction and improvement in P.C.M. transmission will render this dispersed P.C.M. scheme the preferred method of operation within the life of a REX exchange installed today.

Conclusion
For nearly 60 years the company has contributed original and pioneer work to the development of automatic telephony and by any standards this contribution has been great in proportion to the size of the company.  The telephone manufacturing industry has now entered a new era of equipment engineering which the pioneering work of the company has done much establish.  Since 1952 the Telecommunications Group at A.E.I. have been engaged in extensive research in the now very wide field of electronic and semi-electronic telephone exchanges.  This work has culminated in the complete design, evaluation, and testing of two distinct systems together with the automatic and semi-automatic assembly and wiring  machinery for producing them.

Even as the marketing campaign for these systems intensifies, A.E.I. development engineers are concentrating their attention on future improvements to the existing REX systems in terns  of cost reduction, improvement and extended customer services and greater security of service.

This document was originally complied by the A.E.I. Public Telephone Department, Woolwich.  SE18 (undated - but believed to be around 1968)
Most of it actually relates to Siemens Brothers.

The Death of a Dinosaur
Peter Paterson, the Sunday Telegraph, 21 April 1968

The fall of A.E.I. to the G.E.C. at the end of last year was a landmark – not only Britain's biggest industrial takeover but perhaps the last of the old-style mergers, for new codes are being established as a result. Meanwhile the human problems it created have still to be solved. The story of what overtook A.E.I, of the warning signs overlooked by the shareholders, Government and Unions, merit deeper study. Here the Industrial Correspondent of The Sunday Telegraph begins the first full account.

Three new takeover codes are being a produced as a result of the General Electric Company's acquisition of Associated Electrical Industries last November. They will undoubtedly change British industrial practice. These codes establishing tougher ground rules for the takeover game, will reflect the sometimes conflicting interests of the City, the Government and the trade unions but in the end the Govern­ment will have to hold the ring. Will this make it easier or more difficult for British industry to merge and rationalise its resources to meet overseas competition?

A.E.I. was one of the proudest, sturdiest oaks in the industrial forest. When it fell the shock tremors created a new, critical approach by the public towards the mechanics by which one firm assumes the assets the markets the goodwill and the equity of a rival concern. There is also concern about the fate of large numbers of workers whose livelihood may be threatened by the "rationalisation" process which must inevitably follow a takeover, that is, when the new owners find themselves with duplicated production facilities.

A post-mortem examination of A.E.I. reveals weaknesses in management and organisation which could, and should have been detected by share holders, by Government and by the unions.

Changes certainly occurred before the fateful day when A.E.I. became forfeit in a game of real life Monopoly. But they came about almost languidly. The consequence was that unpleasant decisions like the closure of the A.E.I. telecommunications factories at Woolwich, Harlow and Sydenham had to be taken almost at once by the new management, who thus incurred a great deal of misdirected wrath.

The amount of anger stirred up has created a "backlash" among the former A.E.I. employees. In Woolwich this can be seen in the wave of anti­-Semitism directed at Arnold Weinstock the brilliant industrial manager who master­minded the G.E.C. takeover. In other circumstances it could well have been anti-American­ism. There has also been a certain amount of railing against the Government's regional policies which the workers believe is robbing them of their jobs while subsidising employment in electorally sen­sitive Scotland, Wales and Northern England. As the recriminations continue to re­verberate, the question arises was this the last, as well as the biggest, of the old-style industrial takeovers?

In April 1967, a prescient share­holder in Associated Electrical Industries then the greatest elec­trical engineering firm in Britain hesitantly stood up at the annual general meeting to urge the chairman Mr. (later Sir) Charles Wheeler to make a _.bid for its smaller, but more dynamic rival the General Electric Company. "Otherwise" said the worried shareholder "GEC will be taking over A.E.I. in a year's time".

The timing was out. But the prophecy was stunningly accurate. On September 28, 1967, G.E.C. made a £114 million bid for A.E.I. The death throes lasted six desperate weeks, weeks full of repentance and promises of glittering future profits. But by November 9th, at the cost of an extra £40 million, Weinstock had pulled off the biggest industrial merger in the history of British industry.

Expansion

What caused the death of the dinosaur? At one time, Oliver Lyttelton (who was chairman from 1945 until he went into the Churchill Government as Colonial Secretary in 1951, returning as Lord Chandos to the chairman­ship again in 1954) could tell the shareholders: "All over the thousand and one activities in which your company is engaged, you can feel the pulse of progress and expansion."

Lord Chandos gave A.E.I. style. He inherited in the boom year after the war a sprawling empire studded with the inventive brilliance of some of the greatest names in industrial history: British Thomson-Houston, Edison, Swan Electric, Metropolitan-Vickers. In a sellers' market with post-war reconstruction of full pace, A.E.I. made big profits 1948, £5 million; 1949, £6 million, 1951, £8.4 million, with the magic £10 million mark being hit in 1953. By 1955 profits, before tax, were running at more than £13 million and Lord Chandos could announce with pride, "We have become by far the largest group engaged in the manufacture of electrical and mechanical equipment in the United Kingdom."

Then things changed. Competi­tion became tougher and the trad­ing profit in 1956 slumped back to £10 million. Lord Chandos began a belated reorganisation scheme to modernise the management struc­ture of the company. Sacred cows were slaughtered.

In spite of the harder going, A.E.1. was still expansionist-minded. In 1978 it bought the old-established W. T. Henley Tele­graph Co. and some smaller com­panies in the same field, bringing its share of the electric cable market to 20% and ending the year with 100,000 employees in more than 50 factories across Britain. It all looked all so solidly expansive.

When the shareholders gathered in April, 1959, for the A.G.M., Lord Chandos, exuding confidence, described their property as "a virile and progressive organisation." But 1958 profits had not confirmed the recovery of the previous year and were down to £11 million, although output at £181 mil­lion was a record for the firm.

Not until two years later did the long-threatened storm break. Angry shareholders staged a revolt at their annual meeting insisting that Lord Chandos should give them an investment and profit breakdown for each of A.E.I.'s divisions. He refused, on the grounds that this would be detri­mental to the company and would give useful information to competitors. An experienced and instinc­tive politician – a great-nephew of Gladstone – he weathered the hour-long grilling he received from the shareholders with aristocratic aplomb.

It is not easy, looking clinically at A.E.I.'s demise as an indepen­dent firm, to isolate any one reason for its downfall. The company had its successes and it had its misfortunes. Like other firms it caught a cold over its participation in the early atomic power programme, suffering a substantial loss on its share of the contract for the Berkeley nuclear station. Then there was the Merlin affair. In the first flush of enthusiasm for the nuclear age, A.E.I. constructed at a cost of half a million pounds, its own private nuclear reactor at Aldermaston. There was no rush, however, by university or other research workers to use Merlin's services so it was dismantled after three expensive years.

Again, A.E.I. attracted a great deal of adverse publicity over the fiasco of the Glasgow elec­tric train service. After only six weeks in operation, the A.E.I. manufactured transformers on the new trains blew up and the service returned to steam. Nine months later, and with A.E.I. a considerable sum poorer, the new trains started running again.

Such incidents are not, how­ever, decisive to the life and death of a company of the size of A.E.I. Other companies indulge in expensive prestige projects, other companies (including G.E.C.) have found that disasters can overtake newly designed locomotives in spite of extensive pre-operational testing.

Historians may attribute A.E.I.'s eventual collapse to its excessive dependence on Government money. Well over a third of the company's business was on contract to the Government or to local authorities and nationalised industries. It was, therefore, virtually a hostage to the ups and downs of Government investment policy in the Eden-Macmillan stop-go era, and the "full-stop" years of the newer Labour administration. Much of its business was with the Central Electricity Generat­ing Board and the subsidiary area boards: massive orders which looked good in the newspapers took years to fulfill and more years to translate into slender profits. Even abroad A.E.I. was dependent on government buyers for the bulk of its orders.

And within the A.E.I. organisation, in spite of the dropping of the old brand names, it was a well established joke that British Thomson-Houston competed more vigorously with Metropolitan Vickers than either did with the rival G.E.C. organisation. It was the dramatic transformation of G.E.C. under the Weinstock regime that led people to begin to make unfavorable comparisons with A.E.I.

Apart from these important factors, there is one single catastrophe which, as in the life of an individual, may be said to have been the turning point in A.E.I.'s existence. This moment of disaster occurred in 1951, when the board of A.E.I. decided to purchase from the Custodian of Enemy Property 15% of the equity of the long established electrical firm of Siemens Bros.

The 450,000 shares had been issued in 1929 to Siemens and Halske, the German electrical concern, as part of an agreement with the British Siemens company, and were impounded at the start of the war. The Custodian, on the instructions of Sir Hartley Shawcross, President of the Board of Trade, sold the shares on a competitive basis to A.E.I. against the protests of British Siemens, which argued, through its chairman, General Sir Hubert Gough, that they should have been offered to the Siemens shareholders.

Sir Hubert's suspicions that "a substantial part of our capital , representing a considerable voting power, passes into the hands of a large combine," were well founded. His anger, however, might have been somewhat tempered had he realised that with the purchase of this block of shares the great combine had invited a very avaricious cuckoo into its nest.

In 1955, A.E.I. consolidated its Siemens investment by acquiring the remaining £3 million of the company's ordinary stock. For the first time A.E.I., was in the telephone business, and an ill-fated adventure it proved to be. Siemens, with its Woolwich main factory, was absorbed into the A.E.I. empire with two earlier acquisitions as Siemens-Edison-Swan. In January, 1959, under Lord Chandos's reorganisation plans, it became the Siemens­Edison-Swan Telecommunications Division. A Year later the brand names were dropped and the Division acquired the more pedes­trian title by which it has become known in the recent crisis over redundancy, inscribed on the banners of angry workers marching to lobby Parliament in defense of their jobs: A.E.I. (Woolwich).

It may be that A.E.I. had become accustomed to the comfort and virtual sanctuary offered by Government contracts. Its executives and managers were used to the Government's way of doing business, and the telephone equipment manufacturing industry already had an arrangement, which had existed since 1928; with the General Post Office known as the "bulk supply agreement" providing as cosy a living for its signatories as any company could desire. This agreement, confined to member companies known as "the ring", consists of a joint committee with the Post Office to determine the allocation of contracts for telephone equipment. When A.E.I. bought Siemens the system was that 90% of Post Office telephone contracts were divided by agreement with­in the ring, with the remaining 10% going for outside tender. Joint research arrangements enabled the members to pool technical know how and vulgar com­petition was "sensibly" cut to the bare minimum. In its first year, the Siemens-Edison-Swan Telecommunications Division failed to make its expected contribution to A.E.I. profits. "The turn-round from profits to losses in this sector of our business has been £722,000" is how Lord Chandos delicately phrased it. "We are budgeting in 1960 for modest improvements." The Division, Lord Chandos grumbled, could no, plan production unless it could reasonably know the plans of the Post Office at longer term. The Post Office, meanwhile, hardly knew itself.

Between 1957 and 1958 members of the ring had to sack 4,000 workers because of Post Office financial cut-backs. When Pye tried to break into the ring in 1960 by taking over one of its members the Telephone Manufacturing Company (Temco), the remaining ring members, including A.E.I., insisted that a large unused manufacturing, capacity existed sufficient to deal with any foreseeable increase in Post Office business. However 1960 brought another telecommunications loss for A.E.I. Reassuring the shareholders, Lord Chandos declared, "We expect to show a reasonable return on capital employed in 1961: The forecast was not borne out. A "modest profit" was reported, but still insufficient in view of capital employed."

Like any other company in trouble, A.E.I. next decided to reach for the management consultants. Paying fees reputedly of £200,000, they hoped to save a million pounds. Sir Charles Wheeler had succeeded Lord Chandos as chairman and he conveyed the unpleasant news to shareholders that 1963 profits fell from £9.3 million to £6.6 million. He complained of the hostile political atmosphere surrounding rationalisation and mergers in British industry: "The comparative smallness of the British home market is a handicap to companies which compete in world markets: why then should we accept the continued fragmentation of an already limited home market?" G.E.C. was, no-doubt listening to every word.

Optimism

In fact, A.E.I.'s almost desperate search for efficiency and profitability began – just – to beat results. The 1964 results were a tonic for the shareholders and pre-tax profits at £11.4 million reached their highest level for nine years. In 1965 they rose again to £13.5 million. Now, optimistic and expansionist noises emerged from the Post Office. The forecast of spending on telephones and exchange equipment was estimated to reach £300 million by 1966. A.E.I. seemed well prepared for the long-awaited boom. In addition to Woolwich and more modern plant at the Hartlepool, the company had decided to build two new telephone factories, in Scotland at Clenrothes new town and at Kirlcaldy.

But the effort to expand telephone manufacturing capacity hit the company hard. Financial results for the first half of 1966 were poor, and this was attributed to "additional costs incurred temporarily by reason of the major expansion of telecommunications production and the rationalisation of the production of cables."

When the full results for 1966 were in, the position was disastrous far A.E.I. Profits fell by a third from £13 million to £9 million. Factories were closed, 3,000 redundancies were declared and departmental heads rolled. Sir Charles Wheeler (whom some shareholders, according to recent poll, fondly confused with the Past President of the Royal Academy) squarely placed the blame on the Telecommunications Division. Profits, he said would have remained unchanged but for the heavy charges incurred in this direction. And he gave shareholders the astounding news that the company was in process of doubling its manufacturing capacity in telecommunications and increasing the labour force by 4,000.

Realism

This effort was subsequently described in a report by A.E.I.'s own investigators, before G.E.C. became the owners as "a violent and unrealistic investment." They found that the expected gains never materialised but that the expansion was nevertheless pressed ahead to meet orders that were never placed. It is clear that in this period permanent damage was done to A.E.I., thus exposing the company to G.E.C.'s successful takeover bid.

By 1967 it was obvious to the industry that the actual level of Post Office spending on telephone equipment was a good deal lower than the earlier optimistic forecasts. The projected target was £200 million by 1968 rather than £300 million. And the sum available had to be shared among all the members of the ring - by G.E.C., Plessey and its subsidiaries, and Standard Telephones as well as A.E.I.

And even with its expensively-acquired increased capacity, A.E.I., along with its ring partners, was unable up to the moment of the takeover to fulfill its Post Office orders on time. Mr. Short, the Postmaster-General, estimated that 80% of equipment orders were up to six months behind contracted delivery date.

A.E.I.'s massive gamble brought its own house down. But all the financial maneuvering of the autumn did nothing for the 110,000 people who still languished on the Post Office's waiting list for a telephone.

The main casualties of the A.E.I. takeover battle are the workers. Those at A.E.I. (Woolwich) are in the front line, because their factory is the first to be marked down for closure by Arnold Weinstock and his advisers. But all over the country former A.E.I. employees, and many G.E.C. staff as well, await the future with fear and uncertainty.

Like the old A.E.I. management, the unions have never come across anyone quite like Weinstock before. As the negotiations over the future of the Woolwich workers hot up, Weinstock tells the union leaders: "Our real competitors are the Japanese. Who would you rather deal with, me or the managing director of Nippon Electric?" The unions and shop stewards ponder the question and become more stubborn.

Last revised: December 31, 2024