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24 Sep 02. The narrow win by Chancellor Schroeder in the German election result with strong support from the Green Party indicates the possibility of substantial cuts in a number of programmes, given the Green’s previous record in voting down any increase in defence spending. The three contracts under the spotlight are A400M, Meteor and Typhoon. A400M is struggling to gain acceptance with Boeing waiting in the wings to increase its C-17 fleet sales to the UK, with full RAF support; Alan Garwood’s departure to DESO may have come at an inopportune time for Meteor which is struggling politically and technically. The ramjet technology is very new and very demanding and MBDA has a very strict contract to adhere to if any delays occur. In addition savings could be made by retaining the existing AMRAAM software and not proceeding with the upgrade for Meteor, the missile is also too long for the F-35 JSF aircraft envisaged as the backbone for the European F-16 fleet replacement. The Typhoon requirement has been questioned in a number of quarters and it may be that the German requirement is cut along with Tranche 3 in the UK, a fact that has been reflected in the 30% drop in BAE’s share price.

BAE has not responded well to recent criticism and we understand that the company is still regarded as hostile in some areas of the MoD. Perhaps this is the early stage of the much heralded move to the U.S. where the company is doing very well thank you, a fact not fully borne out by company in its recent results announcement?

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