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BAE TO RATIONALISE UK LAND BUSINESS?

BAE TO RATIONALISE UK LAND BUSINESS?
By Julian Nettlefold

16 Dec 08. Bloomberg reported that Britain, where the tank was invented during World War I, may be unable to build armored vehicles after BAE Systems Plc said it can’t rule out closing factories in response to government spending cuts. BAE, Europe’s biggest defense contractor, will review the future of its Land Systems unit, the U.K.’s only tank manufacturer, after the decision to freeze a £16bn ($24bn) truck order, Mike Sweeney, a spokesman for the London-based company, said today by telephone.

“If the government wants an indigenous armored-vehicle capability in the U.K. they need to buy something soon from BAE,” said Nick Cunningham, a defense and aerospace analyst at Evolution Securities in London. “Otherwise BAE will have to restructure and scale back its manufacturing business, which could even include selling it or closing it down.”

Britain introduced the world’s first tank at the Battle of the Somme in 1916, and its most recent, the Challenger 2, was built by BAE until 2002 and is in service in Iraq. (See: BATTLESPACE UPDATE Vol.10 ISSUE 49, 11 Dec 2008, U.K. MINISTERIAL STATEMENT ON MoD EQUIPMENT PROGRAMMES).

“We will clearly have to consider what this means for the size and shape of the Land Systems business in the near future,” BAE’s Sweeney said. The company said it can’t rule out U.K. plant closures and job cuts.

“We will retain the skills base to bash metal into tanks, but the question is, what key capabilities will be retained,” said Bernard Jenkin, a Conservative party lawmaker who sits on Parliament’s defense committee. “I would think the next- generation battle tank will be a multinational endeavour.”

The Ministry of Defence didn’t immediately respond to voice- mail messages by Bloomberg seeking comment.

Land Systems UK, which employs 2,000 people at 10 main plants, was a frontrunner to win a contract to build a version of General Dynamics Corp.’s Piranha V, which had been selected to fulfil the utility-vehicle role in the Ministry of Defence’s Future Rapid Effects System program. Following last week’s decision to withdraw the Piranha from its provisional preferred bidder status, the defense ministry also postponed the purchase of two aircraft carriers and scaled back a helicopter order. The ministry said it will refocus the FRES program on Scout tracked vehicles. While BAE is bidding to build the Scout, the equipment won’t enter service until 2013 at the earliest. Production work has dwindled to a handful of soon-to-be- completed models, including the Pinzgauer all-terrain truck and Terrier general support engineer vehicle, plus an unspecified project for a Middle Eastern client.

However, the first blow to the Land Systems strategy came in 2007 when the BAE Hägglunds SEP vehicle did not meet the criteria for inclusion in the Trials of Truth for the FRES UV vehicle. This caused a major hiatus in the BAE Systems Land Systems strategy where 8×8 exports was a major plank in development of this segment.

This was in stark contrast to the USA Land Systems Business which was piling up huge orders right across the board from Bradley and M113 Reset, MRAPS, armoured HMMVs and JLTV success.

SEP survives albeit in development form while BAE awaits decisions in Sweden and in the US where it has offered the vehicle for the Marine Corps Requirement. One suggestion was that flawed Research from an industry expert caused BAE Directors to hype the Land Systems potential.

CTA still remains a large potential Programme for BAE Land Systems but, again, has a long way to go to reach full approval and production in both ammunition and cannon. Again orders are thin on the ground.

BAE received another blow with reports of the Terrier Programme not reaching potential and another delay of ISD by 18 months and an NAO Report looming. With JCB’s HEMEE winning a crucial UOR order, there are suggestions that JCB could win orders slated for

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