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BAe Systems)
BAE SYSTEMS is a multinational defence and commercial aerospace products manufacturer.
History
Formation
It was formed on November 30, 1999 with the merger of British Aerospace and Marconi Electronic Systems (MES), the defence arm of GEC.
It was widely anticipated that British Aerospace would merge with Germany’s DASA to form a pan-European aerospace giant, however BAe chose instead to merge with GEC’s defence electronics business. This move, to create what could be described as a British company compared to what would have been an Anglo-German firm, made the possibility of penetration of the US defence market more likely. Since the creation of BAE SYSTEMS the company has steadily increased its investment in and its revenues from the United States, while continental European companies have made limited moves into that massive market. Major European companies such as Thales and EADS are unlikely to ever be awarded, for example, a position relative to BAE's involvement in the F-35.
While the US competition authorities did not block the merger, they imposed various conditions of their approval due to the integration of BAe and Marconi Electronic Systems in various US defence projects. These conditions were primarily in the internal organisation of the new company.
Following that decision DASA instead merged 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.
Expansion
With almost total consolidation on the European continent BAE turned its attention to America, for example acquiring Lockheed Martin Control Systems, (LCMS) which produces controls for the B-2 Spirit bomber, the C-17 Globemaster strategic transport, the F/A-18, the Boeing 757 and Boeing 767 commercial jets.
Of all the company's activites the most profitable is the Al Yamamah contracts to supply and support the Royal Saudi Air Force. This deal produces nearly half of the company's profits, £411m ($700m) out of £980m in 2003.
In June 2003, rumors started to circulate about a possible merger with either Boeing (who acquired BAE SYSTEMS's partner McDonnell Douglas in 1997) or Lockheed Martin. Later that year the Boeing's Chief Executive denied any possibility of a North American merger on the grounds of "conflict of interest" pertaining to the affiliation with the Airbus consortium. However if that were the only stumbling block it seems likely that BAE would gladly sell its minority share in Airbus to gain a greater share in North American aerospace projects.
In May 2004 it was reported that BAE was considering selling its shipbuilding division, the two Clyde shipyards and the Barrow-in-Furness yard. The company would only say that it was reviewing its operations. If it decided to sell it was understood that General Dynamics would like to acquire the submarine building facilites at Barrow, while Vosper Thornycroft was said to be interested in the remaining yards. BAE SYSTEMS without its shipbuilding assets would be a more attractive partner to an American company such as Boeing - which has stated that the shipbuilding operations are of no interest to them. As of 2005 the more likely move for BAE's shipbuilding operations is their merger with other British shipyards to form a "Newco" shipbuilding company.
On June 4, 2004 BAE outbid General Dynamics for Alvis Vickers. What had seemed a certain win for the American company was stopped by BAE's surprise move and is seen as an attempt to keep such a strong competitor at bay in BAE's "backyard."
On February 20 2005 The Observer reported that BAE was considering selling its 25% stake in Airbus to pursue further acquisitions in the United States; a BAE source denied any such move.
On March 7 2005 BAE announced the $3.974 billion acquisition of the United States defence company United Defense. United Defense is primarily a land systems manufacturer, boosting BAE's involvement in this sector and its sales in the important North American market. UD manufactures combat vehicles, artillery systems, naval guns, missile launchers and precision guided munitions.
Strategy
In the company's 2003 Annual Report Richard Evans sums up BAE's strategy since the Marconi merger:
- In recent years BAE Systems has undergone a radical transformation from a UK-based aircraft manufacturer to a broadly-based systems business. Through this transformation the company has achieved a more balanced portfolio and geographic spread.
Table 1 BAE 2003 results (source BAE Annual report)
| Division |
Order book (£m) |
Sales (£m) |
Profit |
Employees |
| General programmes |
11,300 |
2,436 |
56 |
19,400 |
| Customers Solutions & Support |
2,600 |
2,166 |
411 |
10,800 |
| Partnerships |
6,800 |
1,685 |
65 |
13,600 |
| Avionics |
2,300 |
1,127 |
12 |
9,400 |
| North America |
2,400 |
2,700 |
232 |
23,150 |
| Commercial aerospace |
21,400 |
2,924 |
204 |
12,150 |
| HQ and other activities |
1,100 |
2,924 |
204 |
4,000 |
| Costs |
(1,900) |
(728) |
|
|
| TOTALS |
46,000 |
12,572 |
980 |
92,500 |
Management
It remains to be seen how the arrival of a new Chairman will affect this position. The appeal of a link with an American company is irresistible as the U.S. defence market is by far the largest in the world. The company already has $9Bn worth of sales to the Pentagon and any further move into the American market would yield yet more. This is particularly the case if BAE Systems can win prime-contractor status on a major project. BAE Systems faces considerably fewer hurdles in this sense than their European counterparts, as there is a high degree of integration between the U.S. and British defence establishments.
In late March 2004, after more than 30 years with the company (and its predecessors), BAE Systems' longstanding Chairman Sir Richard Evans announced his successor. Dick Olver, former Deputy Chief-Executive BP succeeded Sir Richard on July 1.
This appointment comes at a significant time, stock market confidence is still recovering from a shock profit warning in December 2002. This was due to cost overruns of the Nimrod MR4 maritime reconnaissance/attack aircraft and the Astute SSN projects. BAE Systems took a hit of $1.369Bn on these projects.
BAE SYSTEMS' CEO is Mike Turner, who replaced John Weston in 2002. Weston was forced out in what was a surprise move. It is understood that Turner, like Evans, has a poor working relationship with senior Ministry of Defence officials, including the Defence Secretary Geoff Hoon. Significantly the first meeting between Olver and Hoon is said to have gone well, a MoD official has said "He is a man we can do business with. We think it is good to be taking a fresh look at things." [1]
In July, 2004 Olver announced a review of all of BAE's activities, which will be conducted by independent analysts lead by investment bank Morgan Stanley. This review will advise the group on what its strategy should be and hence what acquisitions or disposals it needs to make. Harry Stonecipher, former CEO of Boeing, has criticised the vertical integration of BAE Systems.
Organisation
Boeing 777 wing leading edge manufactured by BAE SYSTEMS
Airbus UK
Airbus UK is a wholly owned subsidiary of BAE and produces wings for the Airbus aircraft family. Airbus UK has two main sites; Broughton in North Wales carries out final assembly and Filton produces components and wing sections. Airbus UK started work on the wings for the Airbus A380 in August 2002. Filton is also home to a retired Concorde.
BAE Systems Air Systems
Air Systems manages BAE’s military aircraft projects, primarily:
BAE Avionics
BAE Avionics is a major supplier of electronic systems for ground air and sea military platforms. Major products include communication systems, radar, electronic warfare products, laser systems, mission control and systems integration. BAE is the leader of the Euroradar CAPTOR consortium which produces the Typhoon's radar.
BAE C4ISR
BAE C4ISR (Command & Control, Communications, Computing, Intelligence, Surveillance and Reconnaissance) produces battle management systems by either fusing existing systems or supplying new systems.
BAE Customer Solutions & Support
BAE Customer Solutions & Support (CS&S) provides through life support and upgrades for defence forces.
- Operational Services provides spares and support for BAE products including the Hawk, VC-10, Canberra, Nimrod and Jaguar aircraft as well as naval products.
- BAE SYSTEMS Australia provides the same services as the wider CS&S organization but is based in Australia.
- Training Solutions provides a wide range of services. This includes simulator construction and support and operation of the RAF’s North Sea Air Combat Manoeuvring Instrumentation (AMCI) Range.
- CS&S Naval provides maintenance, repairs, minor and major refits for naval vessels. Past projects include reactivation of the Upholder class submarines and Vanguard class upgrades.
The RAF Tornado GR4 upgrade is an excellent example of the work undertaken by the CS&S divison.
BAE Systems Land Systems
BAE Systems Land Systems was created in 2004 to combine BAE’s land warfare systems; RO Defence and Alvis Vickers. This group provides Armoured vehicles, explosives, Artillery Ammunition, Mortars, Small Arms, Naval Ammunition Launchers, Warheads (e.g BROACH ), Multiple Launch Rocket Systems, Tank and Artillery Ordnance, Electronic Systems.
BAE Systems Naval Ships
Formed in 2003 BAE Naval Ships was formed to centralized BAE’s shipbuilding operations. Naval Ships’s shipyards are at Scotstoun and Govan. As well as services, construction products include:
BAE Systems North America
BAE Systems North America’s headquarters are in Rockville, Maryland and the company has facilities in 30 states and Washington D.C. Perhaps the single most important unit of BAE SYSTEMS, it is the business which gives BAE access to the American aerospace and defence market. This is important due to the $400bn spent on defence by the United States government. Hence BAE North America accounts for approximately 30% of the group’s profits while its British operations account for less than 25%.
The major parts of BAE North America are mainly the former GEC businesses in the United States (acquired in 1999). Businesses purchased by the North American division of GEC and BAE include:
- 1998 - Tracor
- 2000 - Lockheed Martin Control Systems
- 2003 - Advanced Power Technologies, Inc (APTI)
- 2003 - MEVATEC
- 2004 - STI Government Systems
- 2004 - Boeing Commercial Electronics
- 2004 - DigitalNet Holdings Inc
- 2004 - ALPHATECH
BAE Regional Aircraft
BAE Regional Aircraft produced the last fully UK built airliner in November 2001, the Avro RJX (formerly the BAE 146). While this unit no longer produces aircraft it continues to lease aircraft and provide support, spares and training for its products, the
BAE Shared Services
BAE Shared Services is the group with BAE responsible for managing resources and directing operations. It manages BAE’s car and aircraft fleets, employee payroll, services and benefits. Shared Services also manages BAE’s Advanced Technology Centre and the company’s IT & e-services contracts. An important part of the company is Property & Environmental Services which manages BAE’s own property and provides specialist services such as defence site decommissioning.
BAE Submarines
BAE Submarines is responsible for the development and production of the Astute class submarine. The submarines are constructed at BAE’s yard at Barrow-in-Furness. The Astute class is a new generation of nuclear attack submarine (SSN) for the Royal Navy. The order for the initial batch of three ships was place in 1997, with Vickers Shipbuilding and Engineering, since absorbed into BAE.
BAE Underwater Systems
This company is responsible for BAE’s extensive range of underwater warfare products:
- Stingray torpedo
- Spearfish torpedo
- Remote minesweepers
- Acoustics countermeasures
BAE Platform Solutions
Platform Solutions is based in the USA as part of BAE North America with facilites in the UK. The company provides vehicle management, power systems, guidance and control interfaces for vehicles, aircraft and UAVs.
Products
Lockheed/BAES/Northrop Grumman F-35
BAE SYSTEMS is in an enviable position. They either lead or have a major stake in some of the most high profile, high technology civil and military aerospace and maritime projects in the world. This is not a complete list, only major projects are included.
Air
Land
(Through BAE Land Systems)
Sea
Future
-
Future Offensive Air System. BAE seem well placed to provide the replacement for the Tornado in the deep strike role. This is due for delivery around 2018.
Affiliations
See also
External links
