LONDON - LucasVarity plc's failed attempt to relocate to the USA cost the supplier £13 million ($21.5 million).
The bill, together with other one-time charges, hit the group's net profits for the third quarter. They slipped 16 percent from £85 million to £71 million. The bulk of the costs came from fees charged by investment bank advisers and brokers.
Before exceptional items, LucasVarity showed a 26 percent improvement in underlying pre-tax profits to £91 million. But this was at the low end of analysts' expectations.
Chief Executive Officer Victor Rice wanted to move LucasVarity to Buffalo, New York, but narrowly failed to win approval from shareholders. Although a majority voted in favor of the proposal, LucasVarity fell short of the necessary 75 percent support by less than 1 percent.
Rice has said that the stock market in the USA is better suited to LucasVarity's plans to buy other companies. Component firms in the USA are allowed by their investors to borrow more, and can therefore pay higher prices for acquisitions.
LucasVarity is conducting a internal review of its operations. It has said it wants to concentrate on three core areas: braking systems and related components; diesel engine injection systems; and specialized aerospace products. The group will announce the review's findings with its full-year results in March 1999.
In the short term, LucasVarity warned that sales in the fourth quarter and into next year would be affected by production cuts in the European car industry. It also pointed to difficult market conditions in Asia and South America.
LucasVarity expects the North American and European car markets to decline by about 3 to 4 percent next year.