LucasVarity putting out the feelers

LUCASVARITY today confirmed that it was in discussions with industry rivals but stressed these were "preliminary" and not just limited to a possible merger, writes David Lister.

In a statement to the Stock Exchange, the Anglo-American car parts giant said it was considering a range of alternatives including "joint ventures, acquisitions, dispositions, alliances and mergers or other combinations".

The news came as Tenneco, one possible US partner, delivered a further dose of bad news to the car industry and underlined the increasing urgency of consolidation among suppliers. The company, which makes suspension systems and exhausts, said fourth-quarter profits would come in below forecasts because of worsening conditions in the car aftermarket business and a handful of one-off charges. LucasVarity shares brushed aside the gloom, adding 5 3/4p to 221p after today's statement. It said it expected to report full-year earnings in line with expectations. Analysts played down suggestions that the group might seek to spin off its aerospace business. They said it could afford to spend around GBP 1 billion on acquisitions, with expansion in Asia and building on its next-generation brakes technology a top priority.

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