British Aerospace

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British Aerospace plc

Fate	Merged with Marconi Electronic Systems
Successor	BAE Systems
Founded	29 April, 1977
Defunct	30 November, 1999
Location	Farnborough, United Kingdom

British Aerospace (BAe) was a UK aircraft and defence systems manufacturer, now part of BAE Systems.

Contents 1 History 1.1 Losses and restructuring 1.2 Corruption allegations 1.3 Expansion in defence and aerospace 1.4 Acquisitions made/divisions established 1.5 Transition to BAE Systems 2 References 3 See also

[edit] History

The company was formed as a statutory corporation on April 29, 1977 as a result the Aircraft and Shipbuilding Industries Act. This called for the nationalisation and merger of the British Aircraft Corporation, Hawker Siddeley Aviation, Hawker Siddeley Dynamics and Scottish Aviation.

In 1979 BAe officially joined Airbus, the UK having previously withdrawn support for the consortium in April 1969.

In accordance with the provisions of the British Aerospace Act 1980 the statutory corporation was changed to a plc, British Aerospace Public Limited Company, on January 1 1981. On February 4 1981 the government sold 51.57% of its shares. The British government sold its remaining shares in 1985, maintaining a £1 Golden Share which allows it veto foreign control of the board or company.

BAe was the UK's largest exporter, a Competition Commission report gives a ten-year aggregate figure of £45 billion, with defence sales accounting for approximately 80%. ^[1]

On September 26, 1985, the UK and Saudi Arabian governments signed the Al Yamamah contract, with BAe as prime contractor. The contracts, extended in the 1990s and never fully detailed, involved the supply of Tornado strike and air defence aircraft, Hawk trainer jets, Rapier missile systems, infrastructure works and naval vessels. The Al Yamamah deals are valued at anything up to £20 billion and still continue to provide a large percentage of BAE Systems' profits.

[edit] Losses and restructuring

In 1991 BAe began to experience major difficulties. BAe saw its share price fall below 100p for the first time. On 1991-09-09 the company issued a profits warning and later that week "bungled" the launch of a £432 million rights issue.^[2] On 1991-09-25 BAe directors lead by CEO Richard Evans ousted the Chairman Professer Sir Roland Smith in a move described by The Independent as "one of the most spectacular and brutal boardroom coups witnessed in many years."^[3]

Richard Evans described the troubles as a confluence of events:^[4]

"our property company [Arlington Securities] was hit with a lousy market. Sales of the Rover Group sank by about a fifth and losses mounted. The government's defence spending volumes underwent a major review. Losses in our commercial aerospace division increased dramatically with the recession in the airline industry."

In mid-1992 BAe wrote off £1 billion of assets, largely as part of redundancies and restructuring of its regional aircraft division.^[5] This was largest asset write-off in UK corporate history. It is interesting to note that The General Electric Company (GEC), later to sell its defence interests to BAe, came close to acquiring BAe at this time. BAe cut 47% of its workforce (60,000 out of 127,000) 40,000 of which were from the regional aircraft division. ^[6]

Evans decided to sell non-core businesses (these "non-core" activities included The Rover Group, Arlington Securities, BAe Corporate Jets, BAe Communications and Ballast Nedam). Although the rationale of diversification was sound (to shield the company from cyclical aerospace and defence markets) the struggling company could not afford to continue the position: "We simply could not afford to carry two core businesses, cars and aerospace. At one point Rover was eating up about £2 billion of our banking capacity." ^[7] BAe Corporate Jets Ltd and Arkansas Aerospace Inc were sold to Raytheon in 1993. In 1994 the Rover Group was sold to BMW and British Aerospace Space Systems was sold to Matra Marconi Space. In 1998 BAe's shareholding of Orange plc was reduced to 5%. The Orange shareholding was a legacy of the 30% stake in Hutchison.

[edit] Corruption allegations

Main article: Al Yamamah

There have been numerous allegations that the Al Yamamah contracts were a result of bribes ("douceurs") to members of the Saudi royal family and government officials. Some allegations suggested that the former Prime Minister's son Mark Thatcher may have been involved, however he has strongly denied receiving payments or exploiting his mother's connections in his business dealings.^[8] The UK National Audit Office investigated the contracts and has so far never released its conclusions - the only NAO report ever to be withheld. The BBC's Newsnight observed that it is ironic that the once classified report analysing the construction of MI5's Thames House and MI6's Vauxhall Cross headquarters has been released, but the Al Yamamah report is still deemed too sensitive.

[edit] Expansion in defence and aerospace

An example of a wing of the first Airbus model, the A300

Panavia Tornado GR1

buzz BAe 146-300

BAe built Eurofighter development aircraft

In 1997 BAe joined the Lockheed Martin X-35 Joint Strike Fighter team.

[edit] Acquisitions made/divisions established

• 1986 - Eurofighter GmbH formed with Alenia Aeronautica, CASA and DASA for development of the Eurofighter Typhoon.
• 1987 - Royal Ordnance
• 1988 - The Rover Group plc
• 1991 - Heckler & Koch GmbH
• 1991 - 30% interest acquired in Hutchison Telecommunications
• 1991 - BAeSEMA formed as a naval systems joint venture company with the Sema Group.
• 1992 - Avro RJ Regional Jets formed to produce the Avro RJ series, the development of the BAe 146.
• 1994 - BAeSEMA, Siemens Plessey and GEC-Marconi form UKAMS Ltd, the UK partner in the Principal Anti-Air Missile System (PAAMS) consortium, Eurosam formed the rest of the consortium.
• 1995 - BAe, the Defence Research Agency (later part of DERA), GEC-Marconi and Cray Research (UK) Ltd form The Farnborough Supercomputing Centre — a collaborative research asset.
• 1995 - Saab Military Aircraft and BAe signed an agreement for the joint development and marketing of the JAS 39 Gripen export version.
• 1996 - BAe and Matra Defense agreed to form a missiles joint venture to be called Matra BAe Dynamics.
• 1998 - UK operations of Siemens Plessey Systems (SPS) acquired from Siemens AG. DASA purchases SPS' German assets.
• 1998 - UKAMS became a wholly owned subsidiary of BAe Dynamics.
• 1998 - SEMA's 50% share of BAeSEMA.

[edit] Transition to BAE Systems

Defence consolidation became a major issue in 1998, with numerous reports linking various European defence groups — mainly with each other but also with American defence contractors.

It was widely anticipated that BAe would merge with Germany’s DASA to form a pan-European aerospace giant. A merger deal was negotiated between Richard Evans and DASA CEO Jürgen Schrempp.^[9]However when it became clear that GEC was selling its defence electronics business Marconi Electronic Systems, Evans put the DASA merger on hold in favour of purchasing Marconi. Evans stated that in 2004 that his fear was that an American defence contractor would acquire Marconi and challenge both BAe and DASA. Schrempp was angered by Evans' actions and chose instead to merge DASA with Aerospatiale to create the European Aeronautic Defence and Space Company (EADS). This group was joined by Spain’s CASA following an agreement in December 1999.

The GEC merger to create a UK company compared to what would have been an Anglo-German firm, made the possibility of further penetration of the United States (US) defence market more likely. The company, initially called "New British Aerospace", was officially formed on November 30, 1999 and known as BAE Systems.

[edit] References

[edit] See also

• Aircraft
• Hawker Siddeley Company