BAE Systems/History

BAE Systems/History (history)

Origins

British Aerospace (BAe) was first formed as a nationalised corporation in April 1977 by the merger of the British Aircraft Corporation, Hawker Siddeley Aviation, Hawker Siddeley Dynamics and Scottish Aviation. State control over the arms trade didn't survive for very long under the Thatcher government, however, with the UK Government selling 51.57% of its shares in BAe in February 1981, upon its formation as a public limited company (PLC). In 1985, the UK Government sold its remaining shares, keeping only a special £1 'golden' share in order to ensure that the company continued under British control.

Al Yamamah

Full article: Al Yamamah

At around the same time as it became an entirely privately-owned company, BAe became involved in one of the biggest trade scandals of the 1980s — the Al Yamamah deals with Saudia Arabia. According to the Financial Times, the arms deal (known as Al Yamamah II) was "the biggest [UK] sale ever of anything, to anyone". The deals were condemned by Amnesty International as a clear endorsement of a country in the hands of a repressive regime who display a "persistent pattern of gross human rights violations". BAe was the prime contractor for the entire deal, which included the sale of 48 Tornado bombers, 24 Tornado fighters, 30 Hawk trainer-fighters, and a large number of Rapier missiles. It also involved millions of pounds worth of corrupt commissions paid to Arabian businessmen, which the Conservative government of the time denied (see Corporate Crimes section). Needless to say, this part of the company's history does not appear on its own corporate timeline.

Expansion

Meanwhile, in 1988 BAe began to expand its holdings, starting with the acquistion of the Rover group. By 1991 Heckler & Koch GMbh, the German small arms company, had joined them, and in 1992 the company reorganised itself. The arms side of the company were amalgamated into British Aerospace Defence Limited, whereas three new companies were formed to replace British Aerospace (Commercial Aircraft) Limited. These were British Aerospace Airbus Limited, British Aerospace Regional Aircraft Limited and British Aerospace Corporate Jets Limited. As well as internal reorganisation, BAe also began to form alliances with other companies in the arms sector; in October 1993 a joint venture company was formed with GEC-Marconi to "manage and develop their involvement in the naval Principal Anti-Air Missile System (PAAMS) guided weapons project." This reflected the increasing trend for co-operation between companies in the sector.

Undeterred by the outrage and corruption which had mired its arms deals to Saudi Arabia, in November 1996 the Conservative Government handed BAe another morally dubious trade agreement. A large shipment of arms, including 16 Hawk fighter aircraft, was to be sent to the dictatorship that ruled Indonesia, despite widespread suspicion that they would inevitably be used to facilitate the repression of East Timor. As Robin Cook stated in the House of Commons in 1994, "Hawk aircraft have been observed on bombing runs in East Timor in most years since 1984." Unsurprisingly, this evidence did nothing to dissuade BAe from extracting the maximum profit available from the deal.

In the following years, BAe continued to restructure its business, concentrating more heavily on its 'core competencies' and divesting its shares in other, unrelated businesses. In March 1998, for example, it disposed of shares representing a 16.11% ownership of Orange plc, making £763.8 million. Meanwhile, it increased its interest in the civil aerospace interest of Airbus, and continued to expand into the US arms market by joining Lockheed Martin's Joint Strike Fighter project team. In September 1998 it entered into partnership agreements (along with Rolls Royce) with the Universities of Cambridge, Sheffield and Southampton in order to "research into future engineering design processes." (See BAE Systems/Crimes)

Merger with Marconi

Perhaps the biggest change for company came in January 1999, when British Aerospace announced its merger with GEC's Marconi Electronic Systems business (essentially the arms dealing side of GEC-Marconi). In November 1999, the two businesses merged, creating a new corporate entity named BAE Systems, which became the largest arms dealer in the world. All was not necessarily rosy with the new company, however, with a profits warning issued on January 10, 2001, wiping away a quarter of the company's value on the stockmarket.

New developments have, however, made the company's future look bright. The UK Government continues to look after its corporate friends, with the recent £28 million sale of a military air-traffic control system to debt-stricken Tanzania causing outrage among ordinary voters. As Justin Forsyth, Oxfam's head of policy, has put it: "It is outrageous that Tanzania's debt relief will go towards bolstering the profits of BAE and Barclays bank rather than helping the poor people of Tanzania". On top of this, the British government is currently mounting an intensive campaign to sell 60 Hawk jets, worth £1bn, to India. This is despite the danger of the India-Pakistan dispute over Kashmir spilling into war and destabilising the entire region. BAE Systems has already sold Jaguar combat aircraft to India in licensing deals that the Ministry of Defence (MoD) refuses to disclose (see Corporate Crimes section).

"War On Terror"

Full article: War On Terror

The "War on Terror" cannot fail to boost BAE's profits, and as the Board of BAE point out in their preliminary results for 2001, the loss of revenue from civilian aeronautics will be mitigated "by the overall improvement in performance in the other business groups." In other words, the fall in civilian air traffic doesn't matter to BAE Systems, because they will continue to profit from the spiral of death and destruction which constitutes the arms trade. The outlook is bright for this company only when it is bleak for the rest of the world.

2002 Boardroom coup

Despite an increase in share prices and a generally good outlook for the company, on Tuesday March 26th, 2002, a boardroom coup shocked The City. This lead to the departure of CEO John Weston, who had been with the company for more than 30 years. It has been suggested that his style clashed with the Chairman of the Board of Directors, Richard Evans, and that the Ministry of Defence (MoD) resented being "bullied" by Weston. As the Observer put it: "Weston had irritated Defence Secretary Geoff Hoon by his opposition to the Government's defence procurement process... Evans is good at relationship building; Weston has sometimes been criticised for adopting a more robust approach with officials." Whatever the reason, Mike Turner (formerly Chief Operating Officer) was quickly promoted to the vacant CEO spot, and The City expects more changes to occur soon, not least in the orientation of the company. Rather than a single focus on the United States, it is thought that Turner will concentrate on keeping the activities of BAE diversified, and on rebuilding relations with the MoD.

Many thanks to our Patrons who cover ~2/3 of our hosting bill. Please join them if you can.