BY AGENCIES
BAE Systems is considering moving more of its defence equipment business overseas as it attempts to offset extensive cuts in spending in the US and Britain, its two main markets.
Analysts feel Britain’s biggest defence manufacturer will have little option but to offer to transfer some of its expertise overseas as the price for breaking into new markets.
BAE is targeting Brazil and the Gulf states for naval and aircraft business as well as Far East countries but the setback in India over the loss of a Typhoon contract is an indication of the tougher competition in what the group had regarded as an extension of the “home market.”
One close BAE watcher said: “They are going to have to do something tangible in return for breaking into new markets and keeping customers and that means shifting more manufacturing abroad.”
Dick Olver, chairman and Ian King, chief executive, are expected to present some outline on future strategy with the release of full year figures on Thursday when it is likely they will also be pressed to reply to criticism from Mike Turner, former chief executive and now chairman of Babcock & Wilcox, that the business is “in a mess.”
Analysts feel BAE - the world’s second biggest defence manufacturer - is better placed than its rivals to handle the downturn in the market. Long-running contracts, particularly in Saudi Arabia, and an international spread of business provide some protection but with the Ministry of Defence attempting to cut spending by £37bn the group has already started to close or rundown facilities in Britain and the US.
Around 15,000 jobs out of a world-wide total of 100,000 have been shed over the past two years and more cuts are in prospect as the recession in defence spending deepens.
Some analysts believe the company is ready to embark on a modest disposal programme that could signal a shift from using cash for share buybacks and provide scope for more generous dividend payouts.
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