British Steel Gets a Yank

And pays millions to sign him

It was a deal more like baseball's free agent wars than one of the most unusual swaps in international business. A Scottish-born U.S. investment banker signed a contract to run one of England's largest government-owned companies. In return, the New York firm he is leaving will be compensated by receiving up to $4.1 million. Members of Parliament denounced the indemnity plan as "monstrous" and "farcical." One M.P. compared it to something straight out of a Gilbert and Sullivan operetta.

More accurately, it seemed like a scene from Annie, with the failing British Steel Corporation as the orphan child, and the part of Oliver Warbucks played by Ian MacGregor, general partner of Manhattan's Lazard Freres & Co. MacGregor, 67, was hired after nearly a year's search by the British government, which owns British Steel, turned up no one in England to run the moribund firm. Forty names were considered, and two British executives turned down the job.

Industry Secretary Sir Keith Joseph called MacGregor "the best man available in the world." His salary will be $109,000, like that of the man he will succeed, Sir Charles Villiers, also 67. That is a big cut for MacGregor, who has been making as much as $1.2 million annually. But under a complex series of payments, the investment banking firm will be reimbursed for losing MacGregor's services. It will receive $1.5 million when MacGregor takes over the company in July. If he does not finish his three-year appointment, up to $1 million will have to be returned. Depending on how well MacGregor performs, Lazard could receive up to $2.6 million more. The exact amount will be worked out by a panel, which includes two Lazard representatives.

To win the full bonus for his firm, the new boss must overcome enormous problems. British Steel lost $700 million in the fiscal year that ended March 31 and is expected to do as poorly during the next twelve months. Now technically bankrupt, it is dependent on handouts from the British Treasury. Although it accounts for up to 80% of Great Britain's steel production, the company has been losing business because of a 13-week strike earlier this year. It also suffers because of its dependence on sickly British companies like Automaker BL Ltd. The aging firm, still one of the world's largest steel makers, has failed to compete with Japan and newly industrialized countries and is severely handicapped by labor troubles, outmoded plants and low productivity. Said MacGregor upon his appointment: "The question isn't how many heads are going to roll. The question is how many jobs can we salvage."

Though born in Scotland, MacGregor has resided in the U.S. for 40 years and is now a naturalized American citizen. Between 1967 and 1977, as chief executive officer of Amax Inc., a molybdenum mining and metals company, he transformed the sleepy firm into a giant natural resources company. In addition to coal, it has large holdings in oil and gas, copper, nickel and iron ore. Although MacGregor is credited with the foresight of having acquired metals and energy sources before their scarcity became apparent, he is criticized for a heavyhanded management style and for failing to keep a close eye on the company's finances. Says an analyst: "His attitude was, 'I don't care what the balance sheet looks like, I'm going to acquire natural resources and some day they'll be valuable.' "

Why is MacGregor venturing into the quagmire of Britain's aged, failing, government-controlled heavy manufacturing industries? Despite his new nationality, he has maintained close ties to his homeland as the owner of a Scottish country home, where he frequently vacations. He also says that he has an "emotional attachment" to the steel industry, where he received early training. And as one associate observed, "If he does well, he could get the reward of rewards and be knighted." As an American citizen, he can receive only an honorary dubbing. And before any future laurels, MacGregor will have some difficult work. In addition to the opposition of Britain's Labor Party, he faces the unpleasant task of laying off one-third of British Steel's 150,000 workers. The cutbacks are hardly likely to cool the company's simmering labor problems. -

This file is automatically generated by a robot program, so viewer discretion is required.