FROM: http://en.wikipedia.org/wiki/BAE_SystemsIn accordance with Federal Laws provided For Educational and Information Purposes – i.e. of PUBLIC InterestBAE SystemsFrom Wikipedia, the free encyclopediaThis article is about the British aerospace and defence company. For other uses, see BAE (disambiguation).Coordinates: 51°16′25″N 0°46′00″W BAE Systems plcType Public limited companyTraded as LSE: BA. Aerospace DefenceIndustry Naval shipbuilding Information security British AerospacePredecessor Marconi Electronic SystemsFounded 30 November 1999Headquarters London, United KingdomArea served Worldwide Dick Olver (Chairman)Key people Ian King (CEO) Civil and military aerospace Defence electronicsProducts Naval vessels Munitions Land warfare systems Maintenance, consultancy, trainingServices etc.Revenue £22.392 billion (2010)Operating £1.505 billion (2010)incomeProfit £1.081 billion (2010)Employees 107,000 (2010)Divisions See belowSubsidiaries BAE Systems Inc.Website www.baesystems.comBAE Systems plc (LSE: BA.) is a British multinational defence, security and aerospace company headquartered inLondon, United Kingdom, that has global interests, particularly in North America through its subsidiary BAESystems Inc. BAE is among the worlds largest military contractors; in 2009 it was the second-largest based on
revenues. It was formed on 30 November 1999 by the £7.7 billion merger of two British companies, MarconiElectronic Systems (MES), the defence electronics and naval shipbuilding subsidiary of the General ElectricCompany plc (GEC), and aircraft, munitions and naval systems manufacturer British Aerospace (BAe).BAE Systems is the successor to various aircraft and defence electronics companies, including The MarconiCompany, the first commercial company devoted to the development and use of radio; A.V. Roe and Company,one of the worlds first aircraft companies; de Havilland, manufacturer of the worlds first commercial jet airliner;British Aircraft Corporation, co-manufacturer of the Concorde supersonic transport; and Supermarine,manufacturer of the Spitfire. Since its formation it has sold its shares in Airbus, Astrium, AMS and AtlasElektronik, and made a number of acquisitions, most notably United Defense and Armor Holdings of the UnitedStates.BAE Systems is involved in several major defence projects, including the F-35 Lightning II, the EurofighterTyphoon, the Astute-class submarine and the Queen Elizabeth-class aircraft carriers. The company has been thesubject of criticism, in terms of general opposition to the arms trade and particularly specific allegations ofunethical and corrupt practices, including Saudi Arabian Al Yamamah contracts with BAE and its predecessor. In2010, BAE Systems agreed to pay £286 million in criminal fines to the Serious Fraud Office and the USDepartment of Justice.BAE Systems is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.Contents[hide] 1 History o 1.1 Heritage o 1.2 Formation o 1.3 Expansion and restructuring o 1.4 Airbus shareholding 2 Products 3 Areas of business o 3.1 UK o 3.2 United States o 3.3 Rest of world 4 Shareholders 5 Organisation 6 Corporate governance 7 Financial information 8 Corruption investigations o 8.1 Serious Fraud Office o 8.2 Saudi Arabia o 8.3 Others 9 Criticism 10 See also 11 References 12 External links History Heritage
Supermarine, manufacturer of the Spitfire was a predecessor company of BAE Systems. It was purchased by Vickers-Armstrongs, which itself was merged into the British Aircraft Corporation in 1960.BAE Systems was formed on 30 November 1999 by the £7.7 billion merger of British Aerospace (BAe) andMarconi Electronic Systems (MES). As a result, BAE Systems is the successor to many of the most famousBritish aircraft, defence electronics and warship manufacturers. Predecessor companies built the Comet, theworlds first commercial jet airliner; the Harrier "jump jet", the worlds first operational Vertical/Short Take-Offand Landing (VTOL) aircraft; the "groundbreaking" Blue Vixen radar carried by Sea Harrier FA2s and whichformed the basis of the Eurofighters CAPTOR radar; and co-produced the iconic Concorde supersonic airlinerwith Aérospatiale.British Aerospace was a civil and military aircraft manufacturer, as well as a provider of military land systems.The company had emerged from the massive consolidation of UK aircraft manufacturers since World War II.British Aerospace was formed on 29 April 1977 by the nationalisation and merger of The British AircraftCorporation (BAC), the Hawker Siddeley Group and Scottish Aviation. Both BAC and Hawker Siddeley werethemselves the result of various mergers and acquisitions.Marconi Electronic Systems was the defence subsidiary of British engineering firm The General Electric Company(GEC), dealing largely in military systems integration, as well as naval and land systems. Marconis heritage datesback to Guglielmo Marconis Wireless Telegraph & Signal Company, founded in 1897. GEC purchased EnglishElectric (which included Marconi) in 1968 and thereafter used the Marconi brand for its defence businesses (asGEC-Marconi and later Marconi Electronic Systems). GECs own defence heritage dates back to World War I,when its contribution to the war effort included radios and bulbs. World War II consolidated this position, as thecompany was involved in important technological advances, notably the cavity magnetron for radar. Between1945 and 1999, GEC-Marconi/Marconi Electronic Systems became one of the worlds most important defencecontractors. GECs major defence related acquisitions included Associated Electrical Industries in 1967, YarrowShipbuilders in 1985, Plessey companies in 1989, parts of Ferrantis defence business in 1990, VickersShipbuilding and Engineering in 1995 and Kværner Govan in 1999. In June 1998, MES acquired Tracor, amajor American defence contractor, for £830 million (approx. US$1.4 billion c. 1998). [show] v d eTimeline of British aerospace companies since 1955Modern timeline of British shipbuilding companies, 1960-present[show] Formation
The 1997 merger of American corporations Boeing and McDonnell Douglas, which followed the forming ofLockheed Martin, the worlds largest defence contractor in 1995, increased the pressure on European defencecompanies to consolidate. In June 1997 British Aerospace Defence Managing Director John Weston commented"Europe... is supporting three times the number of contractors on less than half the budget of the U.S.".European governments wished to see the merger of their defence manufacturers into a single entity, a EuropeanAerospace and Defence Company.As early as 1995 British Aerospace and the German aerospace and defence company DaimlerChrysler Aerospace(DASA) were said to be keen to create a transnational aerospace and defence company. The two companiesenvisaged including Aérospatiale, the other major European aerospace company, but only after its privatisation.The first stage of this integration was seen as the transformation of Airbus from a consortium of British Aerospace,DASA, Aérospatiale and Construcciones Aeronáuticas SA into an integrated company; in this aim BritishAerospace and DASA were united against the various objections of Aérospatiale. As well as Airbus, BritishAerospace and DASA were partners in the Panavia Tornado and Eurofighter Typhoon aircraft projects. Mergerdiscussions began between British Aerospace and DASA in July 1998, just as French participation became morelikely with the announcement that Aérospatiale was to merge with Matra and emerge with a diluted Frenchgovernment shareholding. A merger was agreed between British Aerospace Chairman Richard Evans andDASA CEO Jürgen Schrempp in December 1998.Meanwhile GEC was also under pressure to participate in defence industry consolidation. Reporting theappointment of George Simpson as GEC managing director in 1996, The Independent had said "some analystsbelieve that Mr Simpsons inside knowledge of BAe, a long-rumoured GEC bid target, was a key to hisappointment. GEC favours forging a national champion defence group with BAe to compete with the giant USorganisations." When GEC put MES up for sale on 22 December 1998, British Aerospace abandoned the DASAmerger in favour of purchasing its British rival. The merger of British Aerospace and MES was announced on 19January 1999. Evans stated that in 2004 that his fear was that an American defence contractor would acquireMES and challenge both British Aerospace and DASA. The merger created a vertically integrated companywhich The Scotsman described as "[a combination of British Aerospaces] contracting and platform-building skillswith Marconis coveted electronics systems capability", for example combining the manufacturer of theEurofighter with the company that provided many of the aircrafts electronic systems; British Aerospace was MESlargest customer. In contrast, DASAs response to the breakdown of the merger discussion was to merge withAérospatiale to create the European Aeronautic Defence and Space Company (EADS), a horizontal integration.EADS has since considered a merger with Thales to create a "fully rounded" company.Seventeen undertakings were given by BAE to the Department of Trade and Industry which prevented a referenceof the merger to the Monopolies and Mergers Commission. These were largely to ensure that the integratedcompany would tender sub-contracts to external companies on an equal basis with its subsidiaries. Anothercondition was the "firewalling" of former British Aerospace and MES teams on defence projects such as the JointStrike Fighter (JSF). In 2007 the government, on advice from the Office of Fair Trading, announced it had agreedto release BAE from ten of the undertakings due to "a change in circumstances".BAE inherited the "special" shareholding that was established when British Aerospace was privatised. This specialshare, with a nominal value of £1, is held on behalf of the Secretary of State for Trade and Industry. Thisshareholding prevents amendments of certain parts of the companys Articles of Association without thepermission of the Secretary of State. These Articles require that no foreign person or persons acting together mayhold more than 15% of the companys shares or control the majority of the board and that the CEO and theChairman of BAE Systems must be British nationals.Initially the head office was in the Warwick House in the Farnborough Aerospace Centre in Farnborough,Hampshire, and the company had a London office in the City of Westminster. Expansion and restructuring
BAE Systems first annual report identified Airbus, support services to militaries and integrated systems for air,land and naval applications as key areas of growth. It also stated the companys desire to both expand in the USand participate in further consolidation in Europe. BAE described 2001 as an "important year" for its Europeanjoint ventures, which were reorganised considerably. BAE has described the rationale for expansion in the US; "[it]is by far the largest defence market with spend running close to twice that of the Western European nationscombined. Importantly, US investment in research and development is significantly higher than in WesternEurope." When Dick Olver was appointed Chairman in July 2004 he ordered a review of the companysbusinesses which ruled out further European acquisitions or joint ventures and confirmed a "strategic bias" forexpansion and investment in the US. The review also confirmed the attractiveness of the land systems sectorand, with two acquisitions in 2004 and 2005, BAE moved from a limited land systems supplier to the secondlargest such company in the world. This shift in strategy was described as "remarkable" by the Financial Times.Between 2008 and early 2011 BAE acquired five cyber security companies in a shift in strategy to take account ofreduced spending by governments on "traditional defence items such as warships and tanks".In 2000 Matra Marconi Space, a joint BAE/Matra company, was merged with the space division of DASA to formAstrium. On 16 June 2003 BAE sold its 25% share to EADS for £84 million, however due to the lossmaking statusof the company BAE invested an equal amount for "restructuring". In January 2001 Airbus Industrie wastransformed from an inherently inefficient consortium structure to a formal joint stock company. BAE soldits 54% majority share of BAE Systems Canada, an electronics company, in April for $CAD310 (approx.£197 million as of December 2010). In November 2001, BAE announced the closure of the Avro Regional Jet(Avro RJ) production line at Woodford and the cancellation of the Avro RJX, an advanced series of the aircraftfamily, as the business was "no longer viable". The final Avro RJ to be completed became the last British civilairliner. In November 2001 BAE sold its 49.9% share of Thomson Marconi Sonar to Thales for £85 million. Afurther step of European defence consolidation was the merger of BAEs share of Matra BAe Dynamics and themissile division of Alenia Marconi Systems (AMS) into MBDA in December. MBDA thus became the worldssecond largest missile manufacturer. Although EADS has been reported to be interested in acquiring full controlof MBDA, BAE has said that, unlike Airbus, MBDA is a "core business".The Astute-class submarine project caused BAE to issue a profit warning in 2002 and invest £250 million to overcome itsdifficulties.In June 2002, BAE confirmed it was in takeover discussions with TRW, an American aerospace, automotive anddefence business. This was prompted by Northrop Grummans £4.1 billion (approx. US$6 billion c. 2002) hostilebid for TRW in February 2002. A bidding war between BAE, Northrop and General Dynamics ended on 1 Junewhen Northrops increased bid of £5.1 billion was accepted. On 11 December 2002, BAE issued a shock profitwarning due to cost overruns of the Nimrod MRA4 maritime reconnaissance/attack aircraft and the Astute-classsubmarine projects. On 19 February 2003 BAE took a charge of £750 million against these projects and theMinistry of Defence (MOD) agreed to pay a further £700 million of the cost. In 2000 the company had taken a
£300 million "loss charge" on the Nimrod contract which was expected to cover "all the costs of completion of thecurrent contract".The UK government, following a cabinet row described as "one of the most bitter Cabinet disputes over defencecontracts since the Westland helicopter affair in 1985", ordered 20 BAE Hawk trainer aircraft with 24 options inJuly 2003 in a deal worth £800 million. The deal was significant because it was a factor in Indias decision tofinalise a £1 billion order for 66 Hawks in March 2004. Also in July 2003 BAE Systems and Finmeccanicaannounced their intention to set up three joint venture companies, to be collectively known as Eurosystems. Thesecompanies would have pooled the avionics, C4ISTAR and communications businesses of the two companies.However the difficulties of integrating the companies in this way led to a re-evaluation of the proposal; BAEs2004 Annual Report states that "recognising the complexity of the earlier proposed Eurosystems transaction withFinmeccanica we have moved to a simpler model". The main part of this deal was the dissolution of AMS and theestablishment of SELEX Sensors and Airborne Systems; BAE sold its 25% share of the latter to Finmeccanica for€400 million (approx. £270 million c. 2007) in March 2007.In May 2004, it was reported that BAE was considering selling its shipbuilding divisions, BAE Systems NavalShips and BAE Systems Submarines. It was understood that General Dynamics wished to acquire the submarinebuilding facilities at Barrow-in-Furness, while VT Group was said to be interested in the remaining yards on theClyde. However in 2008 BAE Systems merged its Surface Fleet arm with the shipbuilding operations of VTGroup to form BVT Surface Fleet, an aim central to the British Governments Defence Industrial Strategy.BAEs £2.5 billion purchase of United Defense in 2005 added the M2/M3 Bradley family of armoured vehicles to its productline.On 4 June 2004, BAE Systems outbid General Dynamics for Alvis Vickers, the UKs main manufacturer ofarmoured vehicles. Alvis Vickers was merged with BAEs RO Defence unit to form BAE Systems LandSystems. Recognising the lack of scale of this business compared to General Dynamics, BAE executives soonidentified the US defence company United Defense Industries (UDI), a major competitor to General Dynamics, asa main acquisition target. On 7 March 2005 BAE announced the £2.25 billion (approx. US$4.2 billion c. 2005)acquisition of UDI. UDI, now BAE Systems Land and Armaments, manufactures combat vehicles, artillerysystems, naval guns, missile launchers and precision guided munitions.In December 2005, BAE announced the sale of its German naval systems subsidiary, Atlas Elektronik, toThyssenKrupp and EADS. The sale was complicated by the requirement of the German government to approveany sale. The Financial Times described the sale as "cut price" because French company Thales bid €300 million,but was blocked from purchasing Atlas on national security grounds. On 31 January 2006 BAE announced thesale of BAE Systems Aerostructures to Spirit AeroSystems, Inc. BAE said as early as 2002 that it wished todispose of what it did not regard as a "core business".On 18 August 2006 Saudi Arabia signed a contract worth £6 billion to £10 billion for 72 Eurofighter Typhoons, tobe delivered by BAE. On 10 September 2006 BAE was awarded a £2.5 billion contract for the upgrade of 80Royal Saudi Air Force Tornado IDSs. One of BAEs major aims, as highlighted in the 2005 Annual Report, wasthe granting of increased technology transfer between the UK and the US. The F-35 (JSF) programme became thefocus of this effort, with British government ministers such as Lord Drayson, Minister for Defence Procurement,
suggesting the UK would withdraw from the project without the transfer of technology that would allow the UK tooperate and maintain F-35s independently. However, on 12 December 2006, Lord Drayson signed an agreementwhich allows "an unbroken British chain of command" for operation of the aircraft. On 22 December 2006 BAEreceived a £947 million contract to provide guaranteed availability of Royal Air Force (RAF) Tornados.On 7 May 2007 BAE announced its subsidiary BAE Systems Inc. was to purchase Armor Holdings for £2.3 billion(approx. US$4.5 billion c. 2007) and completed the deal on 31 July 2007. The company is a manufacturer oftactical wheeled vehicles and a provider of vehicle and individual armour systems and survivabilitytechnologies. BAE (and British Aerospace previously) was a technology partner to the McLaren Formula Oneteam from 1996 to December 2007. The partnership originally focused on McLarens F1 cars aerodynamics,eventually moving on to carbon fibre techniques, wireless systems and fuel management. BAEs main interest inthe partnership was to learn about the high speed build and operations processes of McLaren.BAE announced the acquisition of Tenix Defence, a major Australian defence contractor on 18 January 2008. Thepurchase was completed on 27 June for AU$775 million (£373 million) making BAE Systems Australia thatcountrys largest defence contractor. The UK Ministry of Defence awarded BAE a 15 year munitions contract inAugust 2008 worth up to £3 billion. The contract guarantees supply of 80% of the UK Armed Forces ammunitionand required BAE to modernise its munitions manufacturing facilities. BAE expanded its intelligence andsecurity business with the £531 million purchase of Detica Group in July 2008. It continued this strategy withpurchases of Danish cyber and intelligence company ETI for approximately $210 million in December 2010, andNorkom Group PLC the following month for €217 million. The latter provides counter fraud and anti-moneylaundering solutions to the global financial services industry where its software assists institutions to comply withregulations on financial intelligence and monitoring.In February 2010 BAE announced a £592 million writedown of the former Armor Holdings business following theloss of the Family of Medium Tactical Vehicles contract in 2009. BAE was outbid by Oshkosh Corporation forthe £2.3 billion ($3.7 billion) contract. Land and Armaments had been the "star performer" of BAEssubsidiaries, growing from sales of £482 million in 2004 to £6.7 billion in 2009.BAE inherited British Aerospaces 35% share of SAAB AB, with which it produced and marketed the Gripenfighter aircraft. In 2005 it reduced this share to 20.5% and in March 2010 announced its intention to sell theremainder. The Times stated that the decision brought "to an end its controversial relationship with the Gripenfighter aircraft". Several of the export campaigns for the aircraft were subject to allegations of bribery andcorruption. Meanwhile the company was increasing its presence in India with the formation of Defence LandSystems India in April, a joint venture with Mahindra & Mahindra Limited. BAE holds just 26% of the equity dueto Indian foreign direct investment regulations.BAE continued its move into support services in May 2010 with the purchase of the marine support companyAtlantic Marine for $352 million. In September 2010 BAE announced plans to sell the Platform Solutionsdivision of BAE Systems Inc., which the Financial Times said could yield as much as £1.3 billion. However,despite "considerable expressions of interest", the sale was abandoned in January 2011. On 19 October 2010the British government cancelled the Nimrod project as part of its Strategic Defence and Security Review. Thepurchases of Queen Elizabeth-class aircraft carrier, the Astute class submarines, and the Type 26 frigates were allconfirmed. A new generation of nuclear missile submarines will be built, however the final decision will bedelayed until after the next election.In September 2011, BAE Systems began consultation with unions and workers over plans to cut nearly 3,000 jobs,mostly in the companys military aircraft division. Airbus shareholdingMain article: Airbus
BAE Systems inherited British Aerospaces share of Airbus Industrie, which consisted of two factories atBroughton and Filton. These facilities manufactured wings for the Airbus family of aircraft. In 2001 Airbus wasincorporated as Airbus SAS, a joint stock company. In return for a 20% share in the new company BAE transferredownership of its Airbus plants (known as Airbus UK) to the new company.Despite repeated suggestions as early as 2000 that BAE wished to sell its 20% share of Airbus, the possibility wasconsistently denied by the company. However on 6 April 2006 BBC News reported that it was indeed to sellits stake, then "conservatively valued" at £2.4 billion. Due to the slow pace of informal negotiations, BAEexercised its put option which saw investment bank Rothschild appointed to give an independent valuation. Sixdays after this process began, Airbus announced delays to the A380 with significant effects on the value of Airbusshares. On 2 June 2006 Rothschild valued BAEs share at £1.87 billion, well below BAEs, analysts and evenEADS expectations. The BAE board recommended that the company proceed with the sale. On 4 October 2006shareholders voted in favour and the sale was completed on 13 October. BAEs sale of its Airbus share saw theend of UK owned involvement in civil airliner production. Airbus UK continues to be the Airbus "Centre ofExcellence" for wing production, employing approximately 140,000 directly and indirectly, but is entirely ownedby EADS. ProductsBAE produces the aft fuselage, tails, fins, electronic warfare system, and various other sub-systems for the F-35 Lightning IIBAE Systems Surface Ships builds the Type 45 Destroyer. Other subsidiaries of BAE supply the naval gun and SAMPSONand S1850M radars for the class.BAE plays a significant role in the production of military equipment, in 2008 95% of BAE Systems’ total saleswere military related.BAE plays important roles in military aircraft production. The companys 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 governmentdeclassified the HERTI (High Endurance Rapid Technology Insertion), an Unmanned Aerial Vehicle (UAV)which can navigate autonomously.
BAE Systems interests in commercial aviation are vested in BAE Systems Regional Aircraft. This unit no longerproduces aircraft, however it continues to lease and support its products, the BAe 146/Avro RJ family, BAe ATP,Jetstream and BAe 748.BAE Systems Land and Armaments manufactures the M2/M3 Bradley fighting vehicle family, the US NavyAdvanced Gun System (AGS), the M113 armoured personnel carrier (APC), the M109 Paladin, the British ArmysChallenger II, Warrior Tracked Armoured Vehicle, M777 howitzer and the Panther Command and Liaison VehicleMajor naval projects include the Astute-class nuclear submarine, Type 45 air defence destroyer and QueenElizabeth class aircraft carrier. Areas of businessBAE Systems defines its "home markets" to be Australia, India, Saudi Arabia, the UK and the US. UKBAE Systems is the predominant supplier to the UK Ministry of Defence; in 2009/2010 BAE Systems companiesin the list of Top 100 suppliers to the MOD received contracts totalling £3.98 billion, with total revenue beinghigher when other subsidiary income is included. In comparison the second largest supplier is BabcockInternational Group & its subsidiaries with a revenue of £1.1 billion from the MOD. Oxford Economic Forecastingstates that in 2002 BAEs 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 projectmanagement by the company, but also in part to the deficiencies in the terms of "fixed price contracts". BAE CEOMike Turner said in 2006 "We had entered into contracts under the old competition rules that frankly we shouldnthave taken". These competition rules were introduced by Lord Levene during the 1980s to shift the burden ofrisk to the contractor and were in contrast to "cost plus contracts" where a contractor was paid for the value of itsproduct plus an agreed profit.BAE was operating in "the only truly open defence market", which meant that it was competing with US andEuropean companies for British defence projects, while they were protected in their home markets. The USdefence market is competitive, however largely between American firms, while foreign companies are excluded. InDecember 2005 the MOD published the Defence Industrial Strategy (DIS) which has been widely acknowledgedto recognise BAE as the UKs "national champion". The DIS identifies key industrial capabilities which must bemaintained within the UK through long-term government commitments to support research spending andprocurement. 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 futureUAV technologies through its collaborative FLAVIIR research programme with EPSRC.After the publication of the DIS BAE Systems CEO Mike Turner said "If we didnt have the DIS and ourprofitability and the terms of trade had stayed as they were... then there had to be a question mark about our futurein the UK". Lord Levene said in the balance between value for money or maintaining a viable industrial basethe DIS "tries as well as it can to steer a middle course and to achieve as much as it can in both directions. ...Wewill never have a perfect solution." United StatesMain article: BAE Systems Inc.
The attraction of MES to British Aerospace was largely its ownership of Tracor, a major American defencecontractor. 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 beenallowed to buy important defence contractors in the US, however its status as a UK company requires that its USsubsidiaries are governed by American executives under Special Security Arrangements. BAE faces fewerimpediments in this sense than its European counterparts, as there is a high degree of integration between the USand UK defence establishments. BAEs purchase of Lockheed Martin Aerospace Electronic Systems in November2000 was described by John Hamre, CEO of the Center for Strategic and International Studies and former DeputySecretary of Defense, as "precedent setting" given the advanced and classified nature of many of that companysproducts.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 worldBAE Systems Australia is the largest defence contractor in Australia, having more than doubled in size with theacquisition of Tenix Defence. The Al Yamamah agreements between the UK and Saudi Arabia require "theprovision of a complete defence package for the Kingdom of Saudi Arabia"; BAE employs 4,600 people in thekingdom. BAE Systems Land Systems South Africa, 75% owned by BAE, is the largest military vehiclemanufacturer in South Africa, and is currently taking part in the US MRAP programme. BAEs interests in Swedenare a result of the purchases of Alvis Vickers and UDI, which owned Hägglunds and Bofors respectively; Thecompanies are now part of BAE Systems AB and have a combined workforce of approximately 1,750. Also, BAESystems owns 49% of Air Astana, Kazakhstan. ShareholdersAs of 18 February 2009 BAE listed the following as "significant" shareholders: AXA (9.02%), Barclays plc(3.98%), Franklin Resources, Inc. and affiliates (4.92%), Legal & General Group plc (4.07%), and BlackRock(4.96%). OrganisationBAE Systems has offices in the Farnborough Aerospace Centre business park. Senior managers are based at the registeredoffice in Carlton Gardens, City of Westminster.A BAE–assembled Eurofighter Typhoon T1. BAE is a partner in Eurofighter GmbH, the multinational company thatcoordinates the design, production and upgrade of the aircraft.
BAE has its head office and its registered office in City of Westminster, London. In addition to its centralLondon offices, it has an office in Farnborough, Hampshire that houses functional specialists and supportfunctions.BAE Systems divides its business into five business groups: Electronics, Intelligence & Support, Land &Armaments, Programmes & Support, International Businesses, and HQ & Other Businesses.Electronics, Intelligence & SupportThis division provides analytic services, system integration, information technology, radar and naval systems andis the worlds largest explosives manufacturer. Electronics & Integrated Solutions manufactures a wide range ofelectronic systems and subsystems for both military and commercial applications.Land and ArmamentsBAE Systems Land and Armaments was formed in 2005 by the merger of the newly acquired UDI with BAESystems Land Systems. The group expanded with the acquisition of Armor Holdings in 2007. BAE SystemsProducts Group manufactures security products such as body armour, forensic kits, handcuffs and holsters for lawenforcement agencies, militaries and security professionals.Programmes & SupportThe Programmes & Support business group includes BAE Systems Military Air & Information, BAE SystemsSurface Ships, BAE Systems Submarine Solutions, and BAE Systems Insyte. Military Air & Information isresponsible for the design, development and production of BAEs major military aircraft programmes; Typhoon, F-35 Lightning II, Hawk and UAV projects such as Taranis. BAEs 33% share of Eurofighter Jagdflugzeug GmbH(33%) represents its involvement in the Eurofighter Typhoon project. BAE Systems Submarine Solutions is thecompanys submarine division. Insyte is a major supplier of defence electronics, integrated command & control(C²) systems, radars, simulators, meteorological systems, data links and C4ISR battle management systems, andnow incorporates BAE Systems Underwater Systems which manufactures underwater warfare products such astorpedoes and minesweeping systems.International BusinessesBAE Systems Australia provides aircraft support, training and simulation, communication and command systemsand is the principal subcontractor to Boeing in the 737 Airborne Early Warning & Control programme. BAESystems Customer Solutions & Support International is centred on provision of services to Saudi Arabia as part ofthe Al Yamamah project and subsequent Saudi Typhoon contract. Other shareholdings include 37.5% of MBDAHQ & OtherBAE Systems Regional Aircraft leases aircraft and provides support, spares and training for its products, the AvroRJ/BAE 146 family, BAe ATP and Jetstream. Corporate governanceBAE Systems chairman is Dick Olver. The executive directors are Ian King (CEO), Linda Hudson, and GeorgeRose. The non-executive directors are Harriet Green, Michael Hartnall, Sir Peter Mason, Carl Symon, RobertoQuarta, Paul Anderson and Nick Rose.The companys first CEO, John Weston, was forced to resign in 2002 in a boardroom "coup" and was replaced byMike Turner. The Business reported that Weston was ousted when non-executive directors informed the
Chairman that they had lost confidence in him. Further, it was suggested that at least one non-executive directorwas encouraged to make such a move by the MOD due to the increasingly fractious relationship between BAE andthe government. As well as the terms of the Nimrod contract, Weston had fought against the MODs insistencethat one of the first three Type 45 destroyers should be built by VT Group. The Business said he considered this"competition-policy gone mad".It is understood that Turner had a poor working relationship with senior MOD officials, (for example with formerDefence Secretary Geoff Hoon) Significantly the first meeting between Olver and Hoon was said to have gonewell, a MOD official commented "He is a man we can do business with. We think it is good to be taking a freshlook at things." It has been suggested that relations between Turner and Olver were tense. On 16 October2007 BAE announced that Mike Turner would retire in August 2008. The Times called his departure plans "abrupt"and a "shock", given previous statements that he wished to retire in 2013 at the age of 65. Despite suggestionsthat BAE would prefer an American CEO due to the increasing importance of the United States defence market tothe company and the opportunity to make a clean break from corruption allegations and investigations related tothe Al Yamamah contracts BAE announced on 27 June 2008 that it had selected the companys Chief operatingofficer Ian King to succeed Turner with effect from 1 September 2008; The Financial Times noted that Kingscareer at Marconi distances him from the British Aerospace-led Al Yamamah project. Financial informationFinancial information for the Company is as follows:BAE Systems revenue by division (2008). Turnover (£ million) Profit/(loss) before tax (£m) Net profit/(loss) (£m) Earnings per share (p)2010-12-31 22,392 1,444 1,081 30.52009-12-31 22,415 282 (45) (1.9)2008-12-31 18,543 2,371 1,768 49.62007-12-31 15,710 1,477 1,177 26.02006-12-31 13,765 1,207 1,054 19.9 [a]2005-12-31 12,581 909 761 13.92005-12-31 15,411 845 555 22.52004-12-31 13,222 730 3 17.4 [b]2003-12-31 15,572 233 8 16.6 [b] [c]2002-12-31 12,145 (616) (686) 17.3 [b]2001-12-31 13,138 70 (128) 23.4 [b]2000-12-31 12,185 179 (19) 18.8 [b]1999-12-31 8,929 459 328 29.4[a]: Restated to exclude Airbus contributions. Included for comparison.[b]: Data prepared using UK GAAP guidelines. Recent data prepared using International Financial Reporting
Standards.[c]: Reflects £750 million charges for problems with Nimrod MRA4 (£500 million) and Astute class submarine(£250 million) programmes. Corruption investigations Serious Fraud OfficeBAE Systems has been under investigation by the Serious Fraud Office, into the use of political corruption to helpsell arms to Chile, Czech Republic, Romania, Saudi Arabia, South Africa, Tanzania and Qatar. Inresponse, BAE Systems 2006 Corporate Responsibility Report states "We continue to reject these allegations...Wetake our obligations under the law extremely seriously and will continue to comply with all legal requirementsaround the world. In June 2007 Lord Woolf was selected to lead what the BBC described as an "independentreview.... [an] ethics committee to look into how the defence giant conducts its arms deals." The report, Ethicalbusiness conduct in BAE Systems plc – the way forward, made 23 recommendations, measures which BAE hascommitted to implement. The finding stated that "in the past BAE did not pay sufficient attention to ethicalstandards in the way it conducted business," and was described by the BBC as "an embarrassing admission."In September 2009, the Serious Fraud Office announced that it intended to prosecute BAE Systems for offencesrelating to overseas corruption. The Guardian claimed that a penalty "possibly of more than £500m" might be anacceptable settlement package. On 5 February 2010, BAE Systems agreed to pay £257m criminal fines to theUS and £30m to the UK. The UK already massively benefited from £43 billion contract in tax receipts and jobs inthe UK, and had dropped an anti-corruption investigation into the Al Yamamah contracts later taken up by USauthorities. Crucially, under a plea bargain with the US Department of Justice BAE was convicted of felonyconspiracy to defraud the United States government and sentenced in March 2010 by U.S. District Court JudgeJohn D. Bates to pay a $400 million fine, one of the largest fines in the history of the DOJ. U.S. District JudgeJohn Bates said the companys conduct involved "deception, duplicity and knowing violations of law, I think itsfair to say, on an enormous scale". BAE did not directly admit to bribery, and is thus not internationallyblacklisted from future contracts. Some of the £30m penalty BAE will pay in fines to the UK will be paid ex gratiafor the benefit of the people of Tanzania. On 2 March 2010 Campaign Against Arms Trade and The CornerHouse were successful in gaining a High Court injunction on the Serious Fraud Offices settlement with BAE. TheHigh Court may order a full review of the settlement. Saudi ArabiaOne of 24 Panavia Tornado ADVs delivered to the Royal Saudi Air Force as part of the Al Yamamah arms sales.Main article: Al-Yamamah arms dealBAE (and British Aerospace previously) has long been the subject of allegations of bribery in relation to itsbusiness in Saudi Arabia. The UK National Audit Office (NAO) investigated the Al Yamamah contracts and hasso far not published its conclusions, the only NAO report ever to be withheld. The MOD has stated "The reportremains sensitive. Disclosure would harm both international relations and the UKs commercial interests." Thecompany has been accused of maintaining a £60 million Saudi slush fund and was the subject of an investigationby the Serious Fraud Office (SFO). However, on 14 December 2006 it was announced that the SFO was
"discontinuing" its investigation into BAE. It stated that representations to its Director and the Attorney GeneralLord Goldsmith had led to the conclusion that the wider public interest "to safeguard national and internationalsecurity" outweighed any potential benefits of further investigation. The termination of the investigation hasbeen controversial. In June 2007, the BBCs Panorama alleged BAE "paid hundreds of millions of pounds tothe ex-Saudi ambassador to the US, Prince Bandar bin Sultan" in return for his role in the Al Yamamah deals.In late June 2007 the United States Department of Justice (DOJ) began a formal investigation into BAEscompliance with anti-corruption laws. On 19 May 2008 BAE confirmed that its CEO Mike Turner and non-executive director Nigel Rudd had been detained "for about 20 minutes" at two US airports the previous week andthat the DOJ had issued "a number of additional subpoenas in the US to employees of BAE Systems plc and BAESystems Inc as part of its ongoing investigation". The Times suggested that such "humiliating behaviour by theDOJ" is unusual toward a company that is co-operating fully.A judicial review of the decision by the SFO to drop the investigation was granted on 9 November 2007. On 10April 2008 the High Court ruled that the SFO "acted unlawfully" by dropping its investigation. The Timesdescribed the ruling as "one of the most strongly worded judicial attacks on government action" which condemnedhow "ministers buckled to blatant threats that Saudi cooperation in the fight against terror would end unless the...investigation was dropped." On 24 April the SFO was granted leave to appeal to the House of Lords againstthe ruling. There was a two-day hearing before the Lords on 7 and 8 July 2008. On 30 July the House ofLords unanimously overturned the High Court ruling, stating that the decision to discontinue the investigation waslawful. OthersHMS Coventry was one of two frigates sold to Romania.In September 2005 The Guardian reported that banking records showed that BAE paid £1 million to AugustoPinochet, the former Chilean dictator. The Guardian has also reported that "clandestine arms deals" have beenunder investigation in Chile and the UK since 2003 and that British Aerospace and BAE made a number ofpayments to Pinochet advisers. In 2003, HMS Sheffield was sold to the Chilean Navy for £27 million, howeverthe governments profit from the sale was £3 million, after contracts worth £24 million were placed with BAE forupgrade and refurbishment of the ship.BAE is alleged to have paid "secret offshore commissions" of over £7 million to secure the sale of HMS Londonand HMS Coventry to the Romanian Navy. BAE received a £116 million contract for the refurbishment of theships prior to delivery; however the British taxpayer only received the scrap value of £100,000 each from thesale.BAE ran into controversy in 2002 over the abnormally high cost of a radar system sold to Tanzania. Thesale was criticised by several opposition MPs and the World Bank; Secretary of State for InternationalDevelopment Clare Short declared that BAE had "ripped off" developing nations. In December 2010,
leaked US diplomatic communications revealed that Edward Hoseah, the Tanzanian prosecutor investigatingmisconduct by BAE, had confided in US diplomats that "his life may be in danger" and was being routinelythreatened.In January 2007, details of an investigation by the Serious Fraud Office into BAEs sales tactics in regard to SouthAfrica were reported, highlighting the £2.3 billion deal to supply Hawk trainers and Gripen fighters as suspect.In May 2011, as allegations of bribery behind South Africas Gripen procurement continued, BAE partner Saabissued strong denials of any illicit payments being made; however in June 2011 Saab announced that BAE hadmade unaccounted payments of roughly $3.5 million to a consultant, this revelation prompted South AfricanOpposition parties to call for a renewed inquiry. The Gripens procurement by the Czech Republic was alsounder investigation by the Serious Fraud Office in 2006 over allegations of bribery. CriticismEspionageIn September 2003 The Sunday Times reported that BAE had hired a private security contractor to collateinformation about individuals working at the Campaign Against Arms Trade and their activities. InFebruary 2007, it again obtained private confidential information from CAAT.Human rights recordsLike many arms manufacturers, BAE has received criticism from various human rights and anti-arms tradeorganisations due to the human rights records of governments to which it has sold equipment. These includeIndonesia, Saudi Arabia, and Zimbabwe. BAEs US subsidiary makes several subsystems for F-16s,which have been supplied to the Israel Defense Forces.Nuclear weaponsIn 2006, BAE was excluded from the portfolio of the government pension fund of Norway "because they developand/or produce central components for nuclear weapons". "According to the ethical guidelines for theGovernment Pension Fund – Global, companies that produce weapons that through normal use may violatefundamental humanitarian principles shall be excluded from the fund." BAE is indirectly engaged inproduction of nuclear weapons – through its 37.5% share of MBDA it is involved with the production and supportof the ASMP missile, an air launched nuclear missile which forms part of the French nuclear deterrent. BAE is alsothe UKs only nuclear submarine manufacturer and thus produces a key element of the UKs nuclear weaponscapability.Cluster bombsBAE has in recent times been criticised for its role in the production of cluster bombs, due to the long termdeath/injury risks they cause to civilians (they behave similarly to land mines). However, after pressure campaignsfrom various human rights groups, BAE recently stated it no longer produces land mines or cluster bombs. See also London portal Hampshire portal Companies portal
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