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Once again BAE SYSTEMS and its largest customer, the UK Ministry of Defence have met head on with regard to crucial negotiations with regard to UK access to the sensitive technology for the United States F-35 Joint Strike Fighter programme. BATTLESPACE believes that Dick Evans concern to frame the right deal for BAE and the UK may stem from the current rumours that BAE is in negotiations with a US buyer.

As BATTLESPACE went to press on June 9th, Stock Market rumours suggested that BAE was in discussions with a merger partner, thought to be Thales or a US company, Boeing or Lockheed Martin; Thales later denied the spculation

However, BATTLESPACE believes, that a more likely scenario is a break up of the company, with the newly formed US run avionics division, together with the other US businesses being taken over by a United States Corporation, with Boeing or Lockheed Martin being the most favoured. This would include any BAE F-35 sub-contract work. The airframe and support businesses business would go into a new company formed with Finmeccania, this would also include the Brough Hawk facility (which may spur the development of a new training aircraft by the two companies), the shipbuilding into a company with Fincanteri and possibly eventually the shipbuilding EADS vision bringing in DCN and the German and Spanish yards and the electronics, C4ISR and radio systems side, including Christchurch, going into the new JV company with Finmeccanica, EUROSYTEMS. The Barrow submarine business given the sensitive US technology would either become a JV with GD or more likely be sold to General Dynamics given the company’s strong experience in nuclear submarine work and its current 250-strong workforce at Barrow. Obviously the true value of the F-35 business is affected by any decision on the IP outcome, which is why Dick Evans and his team are keen that the UK should benefit. The Airbus shareholding would be retained by BAE as the UK plants are now part of Airbus UK. With BAE being split the possibility of Rolls-Royce remaining a single entity looks slim. Although the company has a strong US base with its Allison and F-35 business a US takeover is unlikely given GE’s European experiences in 2001. Therefore a new European engine manufacturer headed by Rolls and Snecma is a more likely scenario

Dick Evans, Chairman of BAE Systems said on May 12th that the U.K. will have to cede control over crucial modifications to its new generation of F-35 fighter to the Pentagon if the US Congress continues to refuse to lift restrictions on technology transfer.

This warning follows moves by US legislators to reject a request by the Bush administration to grant a waiver to the UK as well as Australia.

The move would have allowed a flow of technology transfer from the US to its two closest allies and the decision has angered British military officials after the role the armed forces played in Iraq.

The US Congress is refusing to waive restrictions on the sale of military items to allow the administration to enter into defence trade agreements with its two closest allies in the war on Iraq, Britain and Australia.

The public intervention by Sir Richard has also angered defence officials in Washington, warned one US defence source. It risked upsetting not just BAE’s US partners on the programme but also the Pentagon and the State Department, which controls technology transfer requests.

On May 14th the U.K. MoD hit back at Sir Richard’s statement that it stood to cede control over its new generation F-35 fighter aircraft to the Pentagon because of the refusal by the US to lift restrictions on technology transfer.

The MoD official rejected Sir Richard’s link between Britain’s access to the classified Intellectual Property (IP)data on the F-35 and the refusal by US legislators last week to approve a request from the administrati

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