Taken from: Thisismoney.co.uk
HUGE bills to tackle problems on some of Airbus’s new projects persuaded BAE Systems to sell its 20% stake in the plane maker, industry experts believe
Senior BAE executives have calculated that Airbus will have to find more than £5bn for research and development to solve design problems on the A350 twin-engined wide-bodied jet and extra spending on the new military A400 transporter.
Significantly, BAE’s decision last week to pull out came on the day that Singapore Airlines, the world’s second-biggest carrier, called for a total redesign of the A350 if it was to compete with its Boeing 787 rival.
Spending on these projects would have affected Airbus’s financial performance-in a few years, so faced with a £1bn-plus liability and smaller dividends, BAE calculated that now was the best time to get out.
The value of its stake is being assessed by four banks. An agreement with EADS, the Franco-German company that owns the remaining 80% of Airbus and has first refusal on BAE’s stake, is unlikely to be finalised for weeks.
But its already clear that EADS will have to pay at least £4bn to take complete control of Airbus.
The British government, which has lent Airbus £1.2bn over the past 20 years, is confident that the future of Airbus UK, with 13,000 employees in Broughton, North Wales, is safe.
Its investment in Airbus is guaranteed by commitments made by EADS that it will not relocate to other countries.
But even though the plant has a reputation as the world’s most skilled wing manufacturer, there are fears that Germany may take some business. Last November, Airbus’s plant near Hamburg was given a contract to build part of the A350 wings and the Germans seem confident that they can win more.
While BAE has earmarked most of its Airbus stake to expand in America, which now produces 40% of its profits, it still plans to spread its influence in UK naval shipbuilding-It is still considering whether to make a joint bid with VT Group for Babcock International and it is looking at acquiring other shipbuilders.
It is also believed to be looking at buying Plymouth’s Devonport dockyard, which has been put up for sale by owner KBR, a subsidiary of America’s Halliburton. The yard is valued at about £250m.
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