BAe collapse raises threat of break-up

BRITISH AEROSPACE, the country's biggest manufacturer, shocked the City yesterday by announcing a dramatic slide into losses, 3,000 more redundancies and a pounds 1bn rationalisation of its regional aircraft business. The scale of BAe's crisis renewed concern that the group, which embraces defence, aircraft, Rover cars and property, might be unable to resist a break-up bid, with GEC, Lord Weinstock's electronics empire, as the most likely contender.

More than pounds 300m was wiped off BAe's stock market value after news of the pounds 129m first-half loss. Its shares slumped 86p to a close of 113p as analysts questioned whether the company, which has a pounds 10bn turnover, could retain its independence.

GEC, one of BAe's biggest suppliers of military hardware, was thought to be watching developments closely. But John Cahill, BAe's chairman, said it had not received any approaches. Asked whether Lord Weinstock might attempt a bid or merger, he said: 'That's his option.'

Any break-up of BAe could throw into question the future of Rover, the European Fighter Aircraft programme and Britain's pounds 20bn Al Yamamah arms-for-oil deal with Saudi Arabia.

The pounds 1bn rationalisation of BAe's regional aircraft division, which makes the 146, the Advanced Turbo Prop and the Jetstream, will involve closing its Hatfield plant in Hertfordshire with 2,000 job losses, 1,000 redundancies at two plants in Manchester and the transfer of turboprop production to Prestwick, in Scotland.

BAe also announced an outline agreement with the Taiwan Aerospace Corporation on a joint venture to build its next 146 regional jet. This will mean some aircraft assembly switching to Taiwan.

Dick Evans, BAe's chief executive, said that without the Taiwan deal, job losses would have been considerably higher.

But there was dismay in Hatfield, which is faced with the closure of its biggest employer after almost 60 years of aircraft building. John Weakley, of the Amalgamated Engineering and Electrical Union, said the news was a 'total disaster for Hatfield' and predicted a further 3,000 service industry job losses. John Cunningham, Hatfield's chief test pilot for 33 years, said it was an 'an absolute tragedy'.

Chapter closes, page 3

Details of losses, page 30

View from City Road, page 33