Rolls' Marriage

The "War and Peace "affair

The operation would have done credit to Her Majesty's Secret Service. After four weeks of top-secret negotiations, two of Great Britain's most illustrious engineering companies, Rolls-Royce and Vickers, last week announced plans for a merger that was expected to create a company with annual sales of $1.3 billion. Like any good covert operation, the deal had a code name: War and Peace. The Tolstoyan title was appropriate. Vickers Ltd., code-named War, produced the Spitfire, which helped win the Battle of Britain. Rolls-Royce Motors, nicknamed Peace, has been building the world's most distinguished automobiles since 1904.

The union was something of a marriage of convenience between two shrunken giants. Rolls-Royce, whose models range from the $85,300 Silver Shadow to the $155,800 Corniche convertible, has found that inflation and recession are slowing down even the superrich. The three-year waiting list for its cars in Britain has evaporated, and a buyer with the money can now walk in and get one right off the showroom floor. U.S. sales in 1979 fell off 10%, to 1,002. Moreover, Rolls' diesel-engine division is in trouble, mainly because a $150 million contract to make Iranian tank engines fell through when the Shah was overthrown. Overall, profits before taxes fell 50% last year, to $15 million, on revenues of about $336 million.

Vickers, whose arms once rivaled those of Krupp, is only slightly healthier. Still an important defense and marine engineering contractor, the mighty firm has been suffering from anemic sales since 1977, when the government nationalized its shipbuilding and aircraft operations. Over the past two years, pretax profits have fallen 34% to $15.4 million.

Although Rolls' shareholders will own only 40% of the new company, its group managing director, David Plastow, 47, will become chief executive of the new firm. The automaker will also get top billing in the new corporate name, Rolls-Royce Vickers. Euphony aside, the name is expected to add an element of prestige to the combine. First order of business for the new company: the fall roll-out of a successor to the 15-year-old Rolls-Royce Silver Shadow. The new car's prototype has been code-named the Rolls-009 and will, as the bottom-of-the-line model, sell for more than $100,000.

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