Like many other Western defence companies, Alvis has experienced a sharp contraction in demand. The company also makes night vision and laser sights for the British Challenger and American M1A2 tanks at its plant in Taunton, Somerset.
'We have seen this coming since the Berlin Wall came down,' Tony Pearson, finance director, said yesterday. 'The Ministry of Defence has really brought the pains on.'
The stock market, however, had not fully gauged the extent of the problems, and Alvis shares collapsed from 22p to 10p on the news, before closing at 16p.
Alvis's share price performance is particularly unwelcome news for Brierley Investments, which holds a 29.9 per cent stake through its IEP Securities arm. The shares, bought over the past three years, are carried in IEP's books at about 60p each.
MoD contracts at the Coventry plant have virtually dried up. Regular orders of pounds 20m-plus in the Eighties were reduced to just two pounds 2m contracts last year.
A Scorpion vehicle costs upwards of pounds 250,000. The last big contract, 100 vehicles for Venezuela, expired last year.
Since then, the Coventry site has performed below budget, producing 60 Stormers and overhauling just six Scorpions.
The redundancies, subject to consultation with unions, principally the Amalgamated Engineering Union, will leave around 550 staff at Coventry. The cost, including finance for reorganisation of working practices, will be pounds 5m, leading to annualised savings of pounds 3m to pounds 4m.
Mr Pearson said: 'There are a number of orders pending, and we are confidently expecting some orders from the MoD.' In December the company will announce figures for the year to 30 September. Alvis said yesterday that the result, before exceptional redundancy costs, would be 'broadly similar' to last year's - a pounds 6m profit.Reuse content