BAe looks to job cuts and new partners for salvation: Merger with GEC ruled out and dividend lifted as pre-tax loss tumbles to pounds 237m

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The Independent Online
FURTHER job cuts and joint ventures with foreign partners are on the cards at British Aerospace as the defence and aircraft giant attempts a turnaround from losses totalling more than pounds 1.5bn in the last three years, it emerged yesterday.

The group, still reeling from criticism of its pounds 800m sale of Rover to BMW of Germany, is searching for partners for both its regional jet and turboprop aircraft businesses as well as some defence operations.

But Dick Evans, chief executive, ruled out a full-blown merger with rival defence contractor GEC, led by Lord Weinstock, saying that no talks were going on.

'The way forward in defence is definitely through joint venture activities. There are a number of very important horizontal links with GEC,' he said. 'BAe is a strategic and important customer to GEC and they are also for us strategically important as a supplier. But as of today I can say there are no merger talks going on with GEC.'

His comments came as BAe announced a pre-tax loss of pounds 237m for last year compared with a loss of pounds 1.2bn in 1992. The 1993 figures were hit by a pounds 250m provision to cover leasing libailities on turboprop aircraft.

Before this and other exceptional items BAe made a pre-tax profit of pounds 71m. BAe shares ended 9p higher at 549p, largely due to an unexpectedly generous increase in the final dividend from 4p to 5p, raising the payout for the year to 8.3p.

Analysts were less convinced about the company's prospects. Sandy Morris, of NatWest Securities, cut his profit forecast for this year from pounds 200m to pounds 170m. 'Profits performance is still a bit worrying and commercial aircraft looks appalling. But at least financially BAe is shaping up,' he said.

Although losses in the commercial aircraft division were cut from pounds 337m to pounds 162m it is still poised to lose about pounds 130m this year. But Mr Evans said the lease provisions had removed a 'major obstacle' to finding a joint venture partner for the Jetstream turboprop business, in Prestwick, Scotland.

BAe is in talks with several rival manufacturers, including Fokker of the Netherlands and ATR, a French-Italian consortium, and hopes to strike a deal this year.

Mr Evans also said the door was still open if Taiwan wanted to re- open the abandoned negotiations about a joint venture with Avro, BAe's regional jet division.

However, the planned partnerships in civil aircraft and defence are almost certain to entail fresh provisions and further job losses on top of the 21,000 shed by BAe in the last four years. In 1993 the workforce fell by 15,000 to 87,400.

The impact of the Rover sale, estimated to have netted BAe a profit of up to pounds 400m, are to be published in a circular to shareholders tomorrow.

John Cahill, departing less than half-way through his term as BAe chairman with dollars 4.7m in share options, denied that the sale had 'sold Britain short'.

'Rover will stay in this country manufacturing motor cars for so long as they are competitive,' he said. The deal with BMW was good for Rover and good for BAe.

Mr Cahill, a former chairman of BTR, also denied that he had been forced out by a 'defence mafia' at BAe opposed to his cost control techniques.

BAe had changed from being a 'cost-plus' to a 'cost-conscious' company. 'The job I came here to do has largely been accomplished. If there is a defence mafia I don't know where it is.'

(Photograph omitted)

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