1900 to 1930
S. Smith & Sons (England) Ltd. (Smiths) traces its origin to a jeweller’s shop opened in or about 1851 by Samuel Smith at Newington Causeway. The business included the making and selling of clocks and watches. In 1899 Samuel Smith’s son and successor formed a private company, S. Smith & Son Ltd., and transferred his business to it. The new company supplied ” motor watches” for the earliest cars and in 1904 produced its first speedometer. Carburettors, acetylene lamps, genera- tors and lighting and starting sets were subsequently added. In July, 1914, the present public company was incorporated, under the name S. Smith & Sons (Motor Accessories) Ltd., to take over the motor accessory business of S. Smith and Son Ltd. The new company had a capital of £100,000 in shares of £1 each, half of which were allotted to the vendor company and the other half issued to the general public. The vendor company continued as jewellers and clock and watch makers until about 1930. 250. In the first war the company increased its production of vehicle accessories and manufactured fuses and aircraft instruments. Additional capital was raised and a factory built at Cricklewood. Towards the end of the war Smiths purchased Trier & Martin, which had a small lighting and starting business, and another concern making air-speed indicators. Smiths also manufactured sparking plugs for the Air Ministry under licence from Kenelm Lee Guinness. Guinness, a well-known racing driver, had begun to manufacture plugs for racing cars in 1912 and expanded his production for service purposes during the war. In 1916 he set up the Robinhood Engineering Works Ltd. and transferred his business to it.
In 1919 Smiths acquired the issued share capital of M.L. Magneto Syndicate Ltd., a manufacturer of patented magnetos. In the same year Smiths became sole agent for the sale of K.L.G. plugs made by Robinhood Engineering Works Ltd. Soon after, Smiths met with financial difficulties, and in 1924, with the approval of the Court, the issued share capital was reduced from £1,240,000 to £192,000. The business recovered and in1927 a dividend was paid on the Ordinary shares for the first time since 1919. In 1925 Smiths had acquired the share capital of a company manufacturing mechanical tyre pumps. In the latter part of 1927 it made two important acquisitions, w’z. the whole of the share capital of Robinhood Engineering Works Ltd.* (giving control of the K.L.G. plug business) and 75 per cent. of the share capital of Ed. Jaeger (London) Ltd.
Jaeger was a manufacturer of clocks, watches, speedometers and other instruments and held exclusive licences to make some of these goods under patents belonging to Etablissements Ed. Jaeger S.A., Paris, an associate company, and reputedly the largest manufacturer of speedo- meters in the world. The two companies, the French and the English, were owned by a number of French and Swiss nationals and companies. According to the recollection of one of its directors, Smiths took the initiative in acquiring an interest in the English Jaeger company as it was * Renamed K.L.G. Sparking Plugs Ltd.believed that certain Jaeger interests were approaching Lucas with a view to making an agreement relating to trade in the United Kingdom. In September, 1927 the English and FrenchJaeger companies made an agree- ment which provided for an exchange of technical information and assist- ance and for some sharing of markets for trade in ” licensed articles “, i.e. ” motor and/or aviationaccessories for the time being manufactured by the French company other than articles purchased by the English company from the French company and other than flexible and pulley drives “. The English company had the exclusive right as against the French company to deal in these articles within the United Kingdom, the Dominions (except Canada and Newfoundland), the Colonies and Pro-tectorates. The agreement made no reference to the Swiss company. It seems, however, that there was a close association in technical matters between Smiths and Swiss Jaeger and some French and Swiss interest in the English Jaeger company was retained.
In 1928 A.B.E.C. Ltd. (” All British Escapements Company “) was
formed to manufacture escapements for ” Smiths” and ” Jaeger” car clocks. Smiths was the majority shareholder; the other shares were held by the French and Swiss interests which had retained shareholdings in the English Jaeger company. Swiss foremen were installed to teach the manufacturing technique. Until the war A.B.E.C. operated as a manufacturing unit alongside Jaeger* in the latter’s Chronos Works, North Circular Road, N.W.2, making escapements and components for domestic and car clocks and various other instruments.
Smiths’ development as a supplier of components to the motor vehicle industry reached a turning point in 1930. In that year the company sold all the assets of its Lighting, Starting and Ignition Depart- ment and the whole of the share capital of M.L. Magneto Syndicate Ltd. to Joseph Lucas Ltd., and the two companies made a trading agreement under which each party undertook not to make certain products which were regarded as within the other’s field of interest. These arrangements have already beendescribed in paragraphs 79 to 84. The goods reserved to Lucas which Smiths undertook not to manufacture included starting, lighting and ignition equipment (but not sparking plugs), ammeters, batteries, electric windscreen-wipers, lamps and electric horns. The goods reserved to Smiths which Lucas undertook not to manufacture included sparking plugs, clocks and watches, speedometers and mileage recorders, petrol meters, pressure and oil gauges, dashboard thermometers and mecha- nical windscreen-wipers. Instruments for aviation were also included in Smiths’ allocation. The car clocks and car instruments made by Smiths at this time were mechanically operated, and consequently the only electrical components in current production allotted to Smiths by the agreement were sparking plugs. The agreement also provided that Smiths was to obtain its supplies of batteries and other goods in the Lucas list only from Lucas; Lucas’s price to Smiths for batteries at the time the agreement was signed was to be the retail list price less 62£ per cent, (see
* Renamed British Jaeger Instruments Ltd. in 1931.
From 1930 to 1939
In the next ten years Smiths’ business developed both in the motor vehicle field and outside it. A substantial clock making business was established and Smiths began to make automatic pilots for aircraft and, through the acquisition of a majority interest in Henry Hughes & Sons Ltd., entered the field of marine instruments. Instruments
In the motor vehicle field Smiths was able to concentrate on the production of the instruments and other goods which it was now free to develop without the possibility of competition from Lucas. During this period Smiths began to make electrically operated clocks and instruments. The first electrical petrol gauge for motor vehicles was made hi 1931. Electrical thermometers and electrical oil pressure indicators began to be made for aircraft about 1936 and electrical oil pressure switches for both land vehicles and aircraft were first made and supplied about 1937. The first domestic electric clock was made in 1931, and in 1937 A.B.E.C. began the production of battery impulse car clocks. In its production of clocks and instruments, mechanical and electrical, Smiths benefited con- siderably during this period from the technical assistance given by the French and Swiss Jaeger companies and its electric clocks were, basically, of the Jaeger design developed by the French company.
At the time K.L.G. was acquired by Smiths, K.L.G. plugs were made with mica insulators, as were those of Lodge. Champion plugs, imported from the United States by the Champion Sparking Plug Company, were made with ceramic insulators. K.L.G. set up a ceramic department in 1929 but its experiments were not successful and were brought to an end early in 1931.
Until 1934 K.L.G. plugs were sold retail at 6s. or more, while Lodge and Champion each sold a 5s. plug. The questions of producing a cheaper ” commercial” plug to compete with Lodge and of quoting certain vehicle manufacturers a low price so as to obtain “standardisation”* of K.L.G. plugs on their cars were considered from 1931 onwards. In 1933 it was decided, instead of reducing the prices of the current range of ” K ” plugs, to produce a new type of plug to sell retail at 5s. The use of ceramic
insulators was again considered. In this connection discussions began later in the year between K.L.G. and a member of the Stranahan family (the
founders of the American and British Champion companies) and about the same tune an approach was also made to Bosch, the German producer. K.L.G., which seems to have taken the initiative, proposed to Champion that a jointly owned company should be set up to manufacture plugs for sale to K.L.G. and the British Champion company at cost price. In February, 1934, increasing difficulty in obtaining the right kind of mica was reported by K.L.G.’s General Manager, and it was decided in the negotiations with Stranahan to “lay stress on our intentions regarding the development of * ” Standardisation ” in the company’s records at this time means the acceptance of a particular make of plug as standard equipment for a particular make of car, and is used as the equivalent of ” initial equipment ” or ” initial equipment account”. Ceramic Insulators and increased standardisation”. In March, 1934, the Board finally ” decided to adopt a policy of supplying plugs to manufacturers at prices low enough to secure standardisation on the assumption that increased sale of renewals would provide more than compensating profits “.They considered a list of manufacturers who had “standardised” on Champion plugs and laid it down that the ultimate aim was ” to share equally with Champion the complete standardisation of all the important manufacturers “. In July authority was given to market the new (mica) plug at 5s. retail, and it was reported that Austin had decided to standardise this plug.
For a time negotiations continued with both Stranahan and Bosch. In May, 1935, it was finally decided to bring the negotiations with Stranahan to an end and in August K.L.G. and Smiths made an agreement with Bosch. Under this, Bosch gave K.L.G. an exclusive licence to manufacture in Great Britain ceramic sparking plugs covered by Bosch patents, and undertook to provide technical information about its manufacturing processes. K.L.G. was given a non-exclusive licence to sell these plugs anywhere hi the world except in certain specified countries, which included Germany and the U.S.A. Bosch was assigned £1,000 K.L.G. stock, equal to one-tenth of the company’s existing capital, and was to receive royalty payments at the rate of 1£ per cent, of Smiths’ net sales of ceramic plugs. Bosch was also given certain manufacturing and selling rights in respect of mica plugs covered by German patents belonging to K.L.G. and Smiths which corresponded, broadly, to those conferred on the latter hi respect of ceramic plugs. Letters were attached to the agreement waiving C.A.V.-Bosch rights to manufacture sparking plugs under the agreement made between Lucas and Bosch in 1931 (see paragraph 88). The agreement was to last for ten years.
As a rfesult of the agreement, K.L.G. obtained from Bosch a secret formula for the manufacture of ceramic insulators with fused alumina. A number of technical difficulties were met with but a Board minute of March, 1938, records that the new “Corundite”* plug was now satisfactory and a complete range for practically all modern cars was being produced. In the following month it was decided to reduce the production of mica plugs and increase that of Corundite and generally, through advertising andsalesmen, to “push” Corundite. The same minute records that Austin had agreed to take 2,500 Corundite plugs a week. In the following February, however, a director stated that ” we were not getting sufficient replacement business from standardisation on Austin cars, due to the fact that the Austin engine did not produce any considerable wear on Sparking Plugs”, and it was decided to try to obtain part of Morris’s initial equipment orders. Smiths’ and K.L.G.’s records do not show, in any great detail, the extent of their initial equipment business in the pre-war period. Smiths believes, however, that in 1937-39 it had, though not necessarily continuously, initial equipment contracts for Rolls-Royce, Austin, Morrisf, M.G., Leyland and A.E.C.
From 1930 onwards K.L.G. plugs for replacement were sold through the factors and wholesalers approved by the Sparking Plug Conference. K.L.G. was one of the founder members of this body. An account of the Conference and its activities is given in Chapter 7. * ” Corundite ” is a registered trade mark. Champion claims to have had the Morris account since 1934.
Smiths tells us that it made attempts several years before the war to sell car heaters to car manufacturers. It produced its first prototype heater in 1934 but, owing to the reluctance of manufacturers to take an untried product, it arranged temporarily to import ” Hadees ” recirculatory heaters made by the American Borg Warner company while it developed its own production. Sales were, however, very small. By 1938-39 Smiths was pro- ducing its own version of the imported heater and had also made its first fresh air heating and ventilating unit. Car heaters were not among thegoods listed in the 1930 Lucas agreement. Smiths notified Lucas of its intention to manufacture them ; Lucas at first showed some interest in supplying the electric motors but later found it was not in a position to do so. Smiths obtained its motors before the war from other suppliers, principally Klaxon.
1939 to 1945
During the war Smiths’ production expanded. There was a demand for motor, aircraft and marine instruments for the Services and the production of industrial instruments, hitherto imported, was begun. Fuses were also manufactured. K.L.G.’s output of sparking plugs increased and a second factory at Treforest, requisitioned by the Ministry of Aircraft Production and placed under K.L.G.’s management, was brought into operation. Under Government direction, K.L.G.’s production was, however, devoted to aircraft plugs for the R.A.F. and U.S.A.A.F. Lodge’s production was similarly devoted to aircraft plugs, while Champion and AC-Delco made plugs mainly for military and essential civilian vehicles. During the war K.L.G. although unable to receive technical help from Bosch made considerable technical progress, for instance in the use of new materials. K.L.G. accordingly decided in April, 1944, to cancel the agreement and re-purchase the shares held by Bosch. This was duly effected after the war.
In 1944 a number of changes were made in Smiths’ organisation. The name of the principal company was changed to S. Smith & Sons (England) Ltd. and three new subsidiary selling companies were set up- Smiths Motor Accessories Ltd., Smiths Aircraft Instruments Ltd., and Smiths Industrial Instruments Ltd. Smiths’ shares in K.L.G., British Jaeger and another subsidiary were transferred to Smiths Motor Accessories Ltd.Smiths English Clocks Ltd. (set up in 1931 and now called Smiths Clocks and Watches Ltd.) functioned as another subsidiary selling company. In 1945 Smiths acquired the remaining share capital of A.B.E.C. (which ceased to trade) and the greater part of the outstanding share capital of British Jaeger Instruments ; the remaining shares were acquired in 1952.
Smiths’ business grew rapidly after the war, total sales increasing from £7m. in 1945 to £40m. in 1962. An increase in its trade in motor accessories contributed to this growth but the most marked expansion took place in other fields, particularly in equipment for aviation and marine use and in clocks and watches. During this period Smiths devoted considerable efforts to the development of trade and after-sales service in overseas markets and to research and development projects. The greatest expenditure on research has been in the field of aviation but £l£m. was spent on the development of an automatic transmission system for motor vehicles. The principal developments in the field of reference goods are described in the following paragraphs.
A new and improved type of recirculatory heater and a variety of fresh air heaters and ventilators were evolved, and Smiths began to manu- facture the motors for its heaters. A separate heater factory was established in a disused aerodrome at Witney in 1949. During this period heaters were increasingly adopted by the vehicle industry, the trade and the public- largely, Smiths claims, as a result of its efforts-and sales increased from less than £200,000 in 1947-48 to nearly £7m. in I960.*
In 1952 Smiths made an agreement with the Torrington Manufacturing Company, U.S.A., which gave it, in return for royalty payments on sales, an exclusive licence to manufacture runnersf of Tomngton design. Smiths has told us that the Torrington runners were at the time the best engineering product in the field and that in obtaining this design the company saved itself the time and expense of doing its own development work. Smiths subsequently improved the design and production methods for producing the runner and by 1957 it was doubtful if it fell within the scope of the agreement. A second agreement was made in 1958. This was mainly concerned with non-reference goods and has so far been of no practical importance in relation to car heaters, nor, according to Smiths, is it likely to be.
Smiths began to manufacture additional class (vi) instruments after the war, viz- electrical thermometers in 1952 and electrical oil pressure indicators in 1955. Electric clocks, and the other class (vi) goods introduced before the war continued to be made. All these goods were made alongside their mechanically operated equivalents. Generally, the development of class (vi) instruments was directed towards simpler methods of indication (viz- the use of warning lights or approximately calibrated dials in place of calibrated dials giving more detailed information:}:) and an increasing standardisation of the movements of gauge types of indicator.
Smiths resumed its contacts with the French and Swiss Jaeger com- panies after the war. In 1948 it made an agreement with them under which it was given licences to manufacture, sell and use a range of articles covered by patents owned or controlled by them. The agreement was brought to an end in 1961. The only patents which were relevant to reference goods related to clocks and water temperature indicators. The latter were not used by Smiths and the last of the electric clock patents expired in 1948. However, the basic Jaeger electric clock design continued to be used by
Smiths for virtually all its output. There was an exchange of technical information between Smiths and the French and Swiss companies on matters falling within the agreement and also on those outside its scope.
* These figures relate to heating and ventilating equipment as a whole. Probably rather less than one-fifth of the sales value is attributable to the part of the equipment that is covered by our reference e.g. ” full”, ” half-full”, ” empty ” instead of the number of gallons on a fuel gauge.
In 1954 Smiths, in an exchange of letters with the companies con- cerned, was appointed sole distributor in the United Kingdom of a range of indicating equipment made by (a) V.D.O. Tachometer A.G., Germany, and (b) Jaeger, France, with the right to service this equipment. Smiths gave the other companies reciprocal rights in regard to certain Smiths indicating equipment in West and East Germany and France.
After the war K.L.G. continued to operate the factory at Treforest and bought the plant and equipment from H.M. Government. A new and improved ceramic material-“Hylumina”-was developed by K.L.G. chemists. This took the place of Corundite in K.L.G. sparking plugs and was also used for ignition accessories and various industrial purposes. In 1957 K.L.G. began to manufacture, on a small scale, compression ignition heater plugs. In the following year Smiths made an agreement with Metro- politan-Vickers Electrical Company Ltd. under which it obtained from the latter company an exclusive licence to make heater plugs of a novel design covered in part by patents and the exclusive right to supplies of certain heating elements. Until mid-1960 Metropolitan-Vickers was unable to supply satisfactory elements, but the position then changed and K.L.G. began the production of this type of heater plug.
For some years after the war K.L.G. did not recover any substantial initial equipment business in sparking plugs, the accounts of the leading car manufacturers with which it had formerly done business being obtained by Champion. Smiths regards this, at any rate in part, as a consequence of the war-tune arrangements described above. Smiths’ home trade was almost entirely in replacements and an extensive export trade was also developed. Smiths remained a member of the Sparking Plug Conference and took part in the arrangements made for the listing of factors and wholesalers until the Conference was wound up in 1954 (see Chapter 7).
An important development hi Smiths’ interest hi sparking plugs took place hi January, 1962, when it acquired the whole of the share capital of Lodge Plugs Ltd. The history of this company will be found in the last part (paragraphs 290 to 296) of this chapter. This acquisition brought with it certain initial equipment business in plugs, including that of Standard (see paragraph 294). In addition, K.L.G. has recently obtained the Rootes contract as from April, 1963.
Relations with Other Manufacturers
The agreement with Lucas was ended by mutual consent in March, 1956 (see paragraph 117). Smiths tells us that by 1950 it had ceased “to serve much effective purpose qua agreement, the parties having settled into their respective and separate roles as specialist suppliers to the Motor
Industry. There was therefore no point in determining it; equally there was no point in not determining it, except that a unilateral determination would presumably have been interpreted by the other party as an intention to compete on a particular line, which intention did not exist. The question only came up for consideration as a routine matter. By 1956, however, when the Legislature was giving indications of disapproval to theexistence of such agreements, there was some point in the parties’ determining the Agreement by common consent.” Throughout the post-war period Smiths continued to buy batteries and ammeters from Lucas. Smiths was amember of the B.S.B.A. and it joined the successor association in 1960
Throughout the post-war period Smiths has been the leading supplier of class (v) and class (vi) goods. It did, however, meet some competition, principally from Delaney Gallay on car heaters, and from AC-Delco on indicating equipment. For some years during this period Smiths supplied clock movements to AC-Delco. For a time also, at Ford’s instigation, it supplied water temperature and fuel level indicators to AC-Delco, to enable the latter to incorporate these in the cluster* supplied to Ford. Subsequently AC-Delco bought the manufacturing drawings for the movements from Smiths for a token sum.
PRESENT STRUCTURE AND ORGANISATION
S. Smith & Sons (England) Ltd. has an authorised capital of £10m. of which £7,271,857 has been issued. It has a number of subsidiary com- panies in this country and overseas; the subsidiary principally concerned with reference goods has been Smiths Motor Accessories Ltd. Until recently the group was organised in five Divisions: Motor Accessory, Aviation, Industrial, Kelvin Hughes and Clock & Watch. Electric car clocks are manufactured within the Clock & Watch Division; the manufacture of all
other reference goods and sales of all reference goods were within the Motor Accessory Division. A sixth division ” Spark Plug & Ceramics ” has, however, just been formed to merge the activities of K.L.G. Sparking Plugs Ltd. and Lodge, f The production of reference goods is only a small part of the group’s activities; sales of these goods in 1960 amounted to less than 10 per cent, of the group’s total sales.
Reference goods or parts therefor are made at the following factories:
Car heaters Witney.
Instruments Cricklewood Works.
Car clocks Cheltenham.
Sparking plugs Putney Vale (K.L.G.).
Rugby and Olney (Lodge).
Insulators for plugs … Treforest.
Smiths is the owner of a number of patents and registered designs and is licensed to use a number of patents owned by other companies. Certain of the latter have been mentioned in the first section of this chapter but none is now of importance so far as the reference goods made by Smiths are concerned. At the end of January 1963, Lodge Plugs Ltd. (acquired in January 1962) and K.L.G. Sparking Plugs Ltd. transferrred all or most of their undertakings to S. Smith & Sons (England) Ltd. and became formally the new division. At the same date Smiths Motor Accessories Ltd. ceased to trade and its undertaking was transferred to the parent company.
Swiss and French Jaeger companies, with which Smiths has had associations for many years. Smiths is now a much larger concern than the French Jaeger company and hi recent years has licensed it to make automatic transmission and other equipment outside the reference.
As we have already explained, the goods defined in class (v) as ” air-moving devices ” comprise a motor with a runner or fan. In practice, the heating and ventilating equipment made and supplied by Smiths for initial equipment consists of the air-moving device enclosed in a suitable casing with, in appropriate cases, a hot water radiator element and, where required, the installation accessories. Heaters supplied to the retail trade are generally hi the form of kits including accessories, though the various parts and accessories are available separately if required. Smiths’ production is increasingly devoted to fresh-air heaters as against the older recirculatory type. The former require vents and other adaptations in the body of the car and are tailor-made to a greater or less degree, according to their design, for particular models of cars. Smiths estimates that 60 to 70 per cent, of the cars now made in the United Kingdom are sold with heaters while many other cars are designed for their subsequent installation.
As we have already indicated, Smiths’ electric car clock is a battery impulse type basically of Jaeger design. Smiths is now developing a new transistorised electric impulse clock of its own design. The other goods made by Smiths in class (vi), their method of operation and type of indicator, may be shown in broad outline as follows: Instrument Method of operation Indicator Ignition indicator … From ignition switch or Warning light cut out Water temperature trans-\ Thermal type Gauge
mitter and indicator / Semi-conductor type … Gauge Oil pressure transmitter!Semi.conductor type … Gauge and indicator / JV Oil pressure switch and\” Earth return ” type … Warning light indicator / ” Insulated return” type Warning light Fuel level transmitter^) (“tank unit”) and ^Semi-conductor type … Gauge indicator. The indicator parts of these instruments are in many cases incorporated in a dashboard unit, i.e. the cluster or panel, and the transmitter and indicator parts are ordered separately, even for initial equipment. The warning light type of oil pressure indicator as supplied by Smiths for initial equipment comprises, in the case of more than half its sales, the switch (i.e. the engine attachment) and a coloured window, but the bulb holder, bulb and wire are also supplied hi a considerable proportion of cases, as is the switch by itself. As regards replacement, there is a bigger demand for the transmitter than for the indicator parts of these various instruments. The ignition indicator made by Smiths consists only of the warning light and does not include the ignition switch or cut-out which operates it.
The tendency in recent years has been to develop the use of warning lights in place of calibrated gauges for indicating oil pressure and ignition. Smiths has only one customer for the electrical gauge type of oil pressure indicator. The ammeter, which may be regarded as a gauge type of ignition indicator, is not made by Smiths but is bought from Lucas. Smiths’ aims generally are to standardise the various transmitter units and movements for the gauge types of indicator. About 30 per cent, of its fuel gauges and temperature indicators incorporate a standard movement; the same movement is applicable to oil pressure indicators, and development on a standard transmitter to be used with the latter is proceeding.
The F.R.U. scheme (classes (v) and (v/))
The F.R.U. scheme enables a retail customer to hand in a damaged or worn unit and obtain, in return and on the payment of a specified price, a factory replacement unit. Normally the F.R.U. unit supplied is one which has been repaired or rebuilt, but certain class (vi) F.R.U. units or parts may on occasion be new. In some cases this is because Smiths finds it more economical to supply a new unit than to rebuild a used one ; tank units for fuel level indicators, for example, are usually scrapped when returned. Ammeters when supplied as part of a F.R.U. cluster or subpanel are invariably new. The scheme was introduced in 1947. Before then Smiths had operated a general repair service. Until 1960 the F.R.U. arrangements allowed for a 15 per cent, reduction in the retail price when the unit handed in was less than two years old, but this was found to cause administrative difficulties and has now been generally abandoned. Smiths considers that the scheme gives the public greater advantage than would any of the possible alternatives. Its submissions on this matter are set out in paragraph 932.
The bulk of K.L.G.’s production is of a standard type of plug, sold retail at 5s., but specialised types are also made, e.g. screened plugs, racing plugs and platinum pointed plugs, which are sold at higher prices. Compression ignition plugs are also made, some with elements bought from Metropolitan-Vickers Electrical Company and under patents belonging to that company (see paragraph 271).
Smiths’ sales of reference goods of its own manufacture in 1960 were as follows : £ ‘000
Class (v) 1,2450)
Class (vi) 1,969
Class (viii) 200(2)
Smiths’ sales of batteries (class (i)) made by Lucas were £112,000.
0) Taken as 18 per cent, of Smiths’ sales of car heaters (see paragraphs 540 and 541).
(2) Excluding the sales of Lodge, which was not acquired until 1962.
Classes (v) and (vi)
The greater part of Smiths’ sales of car heaters and class (vi) goods
are for initial equipment; Smiths has a wide range of customers including all the larger vehicle manufacturers. Smiths’ replacement* sales include sales to vehicle makers for resale through their own organisations (manu- facturers’ spares), sales to the motor accessory trade (trade sales), and sales of factory replacement units (F.R.U.) (see paragraph 281). Generally there is a tendency for an increasing proportion of sales to be made through vehicle makers, due to pressure from them. Most trade sales are made through recognised factors.
Only a small proportion of K.L.G.’s production of sparking plugs for land vehicles has been sold for initial equipment purposes. As already mentioned, however, K.L.G. has obtained the account of an important car maker as from April, 1963. Sales for replacement purposes are made mainly through factors.
The batteries sold by Smiths are made specially for the company by Lucas and bear Smiths’ trade mark. They differ from Lucas’s standard production in the type of cell lid and non-spilling vent plug and in the appearance of the case. Smiths sells batteries for replacement purposes only, distributing them through appointed battery distributors. These do not include any of the factors recognised by Smiths for the distribution of its other reference goods. Smiths is a member of the B.S.B.A. (1960)
Smiths’ arrangements for the distribution and sale of reference
goods are described in greater detail
We have already referred to Smiths’ membership of the B.S.B.A. (1960), its continued purchase of batteries from Lucas, and its acquisition of Lodge Plugs. In the classes of reference goods hi which Smiths has the biggest share of trade in the United Kingdom, viz. (v)and (vi), its only current arrangements of any importance are those with V.D.O. Tachometer and the French Jaeger company, and its informal arrangements for technical interchange with the French and Swiss Jaeger companies .
As we have said, the 1930 agreement with Lucas was formally ended in 1956. There is now no understanding, formal or otherwise, between the two companies as to their respective spheres of activity, and Smiths would consider the question of producing goods of the sort made by Lucas, including those which it abandoned in 1930, as a matter to be determined in the light of commercial considerations without regard to the past. As we have indicated in paragraph 152, however, the line of demarcation between the two companies has in fact persisted so far as reference goods are concerned. Smith’s further submissions on this and its position as one of the major suppliers to the motor industry are given in paragraph 936 and paragraphs 938 to 941. * For the reasons given in paragraph 540 the amount of replacement trade, in the strict sense, in car heaters and instruments is limited.
LODGE PLUGS LTD.
As we have already said in paragraph 273 Smiths acquired the whole of the capital of Lodge Plugs Ltd. in January, 1962. Paragraphs 290 to 296 below summarise the history and trading activities of Lodge before this acquisition, and include certain comments and observations made by the company in the course of the evidence which it gave us some time before the acquisition.
Lodge traces its history to a partnership set up in 1904 to market a patented high tension ignition system. Sparking plugs were first manufactured in 1907. In 1913 the business was amalgamated with that of another manufacturer of sparking plugs to form a private company, the Lodge Sparking Plug Company Ltd. This company went into voluntary liquidation in 1919 and the business was transferred to a new company, Lodge Plugs Ltd., which in 1949 became a public company. Lodge’s present authorised capital is £375,000 of which £250,000 has been issued in 5s. stock units.
When acquired by Smiths, Lodge manufactured sparking plugs for motor vehicles, sparking plugs and other equipment for aircraft and a range of ceramic products. Its production of class (viii) goods comprises standard sparking plugs, special sparking plugs for racing and other purposes, and compression ignition heater plugs. Lodge produces a wider range of plug types than Champion, but about 85 per cent, of sales is said to be covered by four basic types. Lodge has made compression ignition heater plugs since 1920. Since about 1936 Lodge plugs have been made with a ceramic (“Sintox”) insulator. Before then mica was used.
In 1960 Lodge was the second largest supplier of goods in class (viii), total net sales in the home market being £323,000 made up of £296,000 standard plugs, £15,000 compression ignition heater plugs and £12,000 screened plugs; sales of the last type have declined considerably in recent years. The number of standard plugs sold for replacement in 1960 was roughly twice that for initial equipment while the value was nearly fourteen times as great. Exports are made to many countries, including the U.S.A., and in 1958 accounted for nearly three-fifths of the total production of standard plugs.
Before the war Lodge had a considerable business in initial equipment. It believes that its share of this trade was at a maximum about 1933 and began to decline substantially in the period 1937 to 1939, accounts being lost to competitors, principally Champion. Lodge believes that Champion got into this market by vigorous price cutting; the differential between Champion’s replacement and initial equipment prices was of an order, Lodge says, hitherto unknown in this country. During the war Lodge’s production, like K.L.G.’s, was allocated under Government direction to aircraft plugs. Lodge believes that it may thereby have lost some ground in the motor industry.
Since the war Lodge’s principal business has been in the replacement and export markets. It has supplied plugs for initial equipment to a number of motor cycle and smaller car manufacturers. From 1957 it has made strong efforts to obtain the accounts of three of the larger car manufacturers by quoting a specially low price. So far, only Standard has accepted this quotation and since March, 1959, it has taken Lodge plugs for all its initial equipment. Lodge believes that there is a general tendency for replacement plugs to follow the brand fitted as initial equipment and that, accordingly, its volume of total sales depends largely on the amount of initial equipment business which it can secure. Lodge told us that it deplored the wide differential between initial equipment and replacement prices, but that it was not within its power to remedy the situation; if it was to survive, it had to use this means of meeting the very fierce competition in this trade.
Lodge sells replacement plugs mainly to factors who supply garages and other retail traders. Lodge believes that it has lost some replacement trade as a result of the arrangements made by vehicle manufacturers for the sale of spares through their own distributive organisations; these distributors are encouraged, if not required, by the vehicle manufacturer to stock and sell replacement plugs only of the type used by him for initial equipment. Lodge fixes prices, under the terms of a limited licence, at the various stages of supply. The retail price for a standard Lodge plug is now 5s.; for some years before 1960 it was 5s. 6d. This provided a bigger margin for the retailer than on Champion and other plugs and it was hoped that he would be encouraged to sell Lodge plugs. The reduction was made partly because it became apparent that the higher retail price outweighed the value of the sales incentive, and partly because of representations for a price reduction made by Standard. The margins allowed by Lodge to its various distributors are still generally higher than those of Champion.
Lodge was a member of the Sparking Plug Conference from its foundation in 1930 and took part in its various activities hi regard to the replacement trade until the Conference was wound up in 1954 (see Chapter 7).
Since its acquisition by Smiths Lodge has begun to manufacture an improved type of plug-the Golden Lodge-which is sold retail at 8s. 6d. The life of the plug, during which it requires no servicing at all, is claimed to be at least twice that of a conventional plug. The new plug has been developed jointly by Lucas and Lodge. Smiths tells us that Lucas approached both Lodge and K.L.G. in 1957 with a proposal for joint work on the development of a new ignition system and plug. Lodge accepted the proposal. Some features of the plug are the subject of a patent held by Lucas and others of a patent application made by Lodge.
The Lodge business, has now been merged with the K.L.G. business in a new Smiths Division. Smiths’ Directors’ Report for 1962 says that the new management structure established for this Division was working smoothly but ” it will be some time before the benefits of integration and rationalisation are realised “.