Bill threatens BAE in US

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The Independent Online

The drive by BAE Systems to conquer the US market could be stopped in its tracks by a new bill that will prevent foreign firms bidding for Pentagon contracts.

The drive by BAE Systems to conquer the US market could be stopped in its tracks by a new bill that will prevent foreign firms bidding for Pentagon contracts.

The US defence bill, which passed the House of Representatives last week, bars foreign arms companies that receive government subsidies from bidding for future US work.

The bill is widely believed to be designed to prevent Franco-German defence company EADS bidding against US rival Boeing for a $20bn (£11bn) air tanker contract. EADS wants to supply the US Air Force with Airbus planes, which have been partly funded by European governments. But industry experts are worried that the bill may also affect BAE because it owns 20 per cent of Airbus.

Alan Sharman, the director general of the Defence Manufacturers Association, said: "We are concerned over how the Americans will interpret the bill and whether this may hit BAE. This is all pretty damned rich of the Americans since they subsidise their own companies in different ways, for example by not running open procurement competitions."

A BAE spokesman said the company was watching the progress of the bill through Congress, but said it was, "premature to speculate about specific language or provisions".

Nevertheless, the new defence procurement minister, Lord Drayson, is understood to be planning to raise the matter with the Americans. A Ministry of Defence spokesman said: "We continue to engage with the US administration in opposing all protectionist provisions in ... the bill as these would negatively impact on the defence capabilities of both countries."

BAE's new chairman, Dick Olver, has set the company on a course to expand in the US. It announced the £2.1bn takeover of US rival United Defense Industries In March.

Even though UDI is based in Arlington, Virginia and registered in the US, according to the small print in the US Defence bill, it is classed as a foreign company because more than 50 per cent of its shares are now held by a British firm.

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