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BAE Systems plc is a British multinational defence, security and
aerospace company headquartered in London, United Kingdom and with operations worldwide. It is among the world's largest defence contractors; it ranked as the third-largest based on applicable 2011 revenues. Its largest operations are in the United Kingdom and United States, where its BAE Systems Inc. subsidiary is one of the six largest suppliers to the US Department of Defense. Other major markets include Australia,
India and Saudi Arabia. BAE was formed on 30 November 1999 by the £7.7 billion merger of two British companies;
Marconi Electronic Systems (MES) - the defence electronics and naval shipbuilding subsidiary of the General
Electric Company plc (GEC) - and British Aerospace (BAe) - an aircraft, munitions and naval systems manufacturer.
BAE Systems is the successor to various aircraft, shipbuilding, armoured vehicle, armaments and defence electronics companies, including The Marconi Company, the first commercial company devoted to the development and use of radio; A.V. Roe and Company, one of the world's first aircraft companies; de Havilland, manufacturer of the world's first commercial jet airliner; British Aircraft Corporation, co-manufacturer of the
Concorde supersonic transport; Supermarine, manufacturer of the
Spitfire; Yarrow Shipbuilders, builders of the Royal Navy's first destroyers; and Vickers Shipbuilding and Engineering, builders of the Royal Navy's first
submarines. Since its formation it has made a number of acquisitions, most notably of United Defense and Armor Holdings of the United States, and sold its shares in Airbus, Astrium, AMS and Atlas Elektronik.
BAE Systems is involved in several major defence projects, including the F-35 Lightning II, the Eurofighter Typhoon, the
Astute-class submarine and the Queen Elizabeth-class
aircraft carriers. The company has been the subject of criticism, in terms of general opposition to the arms trade and particularly specific allegations of unethical and corrupt practices. BAE Systems is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.
PRODUCTS
BAE plays a significant role in the production of military equipment. In 2008, 95% of BAE Systems’ total sales were military related.
BAE plays important roles in military aircraft production. The company's Typhoon fighter and Tornado fighter-bomber are both front line aircraft of the
RAF. BAE is a major partner in the F-35 Lightning II programme. Its Hawk advanced jet trainer aircraft has been widely exported. In July 2006, the British government declassified the HERTI (High Endurance Rapid Technology Insertion), an Unmanned Aerial Vehicle (UAV) which can navigate autonomously.
BAE Systems Land and Armaments manufactures the M2/M3 Bradley fighting vehicle family, the US Navy Advanced Gun System (AGS), the M113 armoured personnel carrier (APC), the M109 Paladin, the British Army's Challenger II, Warrior Tracked Armoured Vehicle, M777 howitzer and the Panther Command and Liaison Vehicle
Major naval projects include the Astute class nuclear submarine, Type 45 air defence destroyer and
Queen Elizabeth class aircraft carrier.
Areas of business
BAE Systems defines its "home markets" to be Australia, India, Saudi Arabia, the UK and the US.
United Kingdom
BAE Systems is the predominant supplier to the UK Ministry of Defence; in 2009/2010 BAE Systems companies in the list of Top 100 suppliers to the MOD, received contracts totalling £3.98 billion, with total revenue being higher when other subsidiary income is
included. In comparison the second largest supplier is Babcock International Group and its subsidiaries, with a revenue of £1.1 billion from the MOD. Oxford Economic Forecasting states that in 2002 BAE's UK businesses employed 111,578 people, achieved export sales of £3 billion and paid £2.6 billion in taxes. These figures exclude the contribution of Airbus UK.
Since its creation BAE had a difficult relationship with the MOD. This was attributed to deficient project management by the company, but also in part to the deficiencies in the terms of "fixed price contracts". BAE CEO Mike Turner said in 2006 "We had entered into contracts under the old competition rules that frankly we shouldn't have
taken". These competition rules were introduced by Lord Levene during the 1980s to shift the burden of risk to the contractor and were in contrast to "cost plus contracts" where a contractor was paid for the value of its product plus an agreed profit.
BAE was operating in "the only truly open defence market", which meant that it was competing with US and European companies for British defence projects, while they were protected in their home markets. The US defence market is competitive, however largely between American firms, while foreign companies are excluded. In December 2005 the MOD published the Defence Industrial Strategy (DIS) which has been widely acknowledged to recognise BAE as the UK's "national champion". The DIS identifies key industrial capabilities which must be maintained within the
UK through long-term government commitments to support research spending and procurement. Of these capabilities, several are dominated by BAE, including naval vessels and submarines, combat vehicles, fixed-wing aircraft, general munitions (with the exception of certain "niche capabilities abroad") and Network Enabled Capability (defined as C4ISTAR in the DIS). The company maintains an interest in future UAV technologies through its collaborative FLAVIIR research programme with EPSRC.
After the publication of the DIS BAE Systems CEO Mike Turner said "If we didn't have the DIS and our profitability and the terms of trade had stayed as they were... then there had to be a question mark about our future in the UK". Lord Levene said in the balance between value for
money or maintaining a viable industrial base the DIS "tries as well as it can to steer a middle course and to achieve as much as it can in both directions. ...We will never have a perfect solution."
In May 2012, BAE was awarded a £328m contract to design the UK’s next generation nuclear-armed submarines, by Ministry of Defence.
United States
The attraction of MES to British Aerospace was largely its ownership of Tracor, a major American defence contractor. Since its creation the company has steadily increased its investment in and revenues from the US.
BAE now sells more to the US Department of Defense (DOD) than the UK MOD. The company has been allowed to buy important defence contractors in the US, however its status as a UK company requires that its US subsidiaries are governed by American executives under Special Security Arrangements. BAE faces fewer impediments in this sense than its European counterparts, as there is a high degree of integration between the US and UK defence establishments. BAE's purchase of Lockheed Martin Aerospace Electronic Systems in November 2000 was described by John Hamre, CEO of the Center for Strategic and International Studies and former Deputy Secretary of Defense, as "precedent setting" given the advanced and classified nature of many of that company's products.
The possibility of a merger between BAE and major North American defence contractors has long been reported, including
Boeing, General Dynamics,
Lockheed
Martin, and Raytheon.
Rest of world
BAE Systems Australia is the largest defence contractor in Australia, having more than doubled in size with the acquisition of Tenix Defence. The Al Yamamah agreements between the UK and Saudi Arabia require "the provision of a complete defence package for the Kingdom of
Saudi Arabia"; BAE employs 4,600 people in the kingdom. BAE Systems Land Systems
South Africa, 75% owned by BAE, is the largest military vehicle manufacturer in South Africa, and is currently taking part in the US MRAP programme. BAE's interests in Sweden are a result of the purchases of Alvis Vickers and UDI, which owned Hägglunds and Bofors respectively; The companies are now part of BAE Systems AB and have a combined workforce of approximately 1,750. Also, BAE Systems owns 49% of Air Astana, Kazakhstan.
In May 2012, BAE signed a £1.9bn ($3bn) deal to supply Hawk trainer jets to Saudi Arabia.
Shareholders
As of 8 October 2012 BAE listed the following as "significant" shareholders: Invesco Perpetual (13.38%), BlackRock (4.66%), Franklin Templeton Investments, (3.95%) and Legal & General, (3.62%).
VT
GROUP exited Shipbuilding in October 2009, after selling its 45% share of the Shipbuilding Joint Venture company BVT Surface Fleet to BAE Systems. Formerly listed on the London Stock Exchange and a constituent of the FTSE 250 Index, the remainder of the firm was acquired by Babcock International Group in July 2010.
LINKS:
The
Solar Navigator - SWASSH (Small Waterplane Area Stabilized Single Hull)
test model 2012
The
latest Solarnavigator is designed to be capable of an autonomous
world navigation set for an attempt
in
2015 if all goes according to schedule.
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