Outlook: Plucky Vickers in search of a future

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The Independent Online
AS the man who originally negotiated the Al Yamamah arms-for-oil deal, Sir Colin Chandler could afford a wry smile yesterday at the news that the collapse in oil prices is draining pounds 2.4m a day from British Aerospace's cash balances.

But that is all he has to grin about. The interruption in BAe's cash flows is a temporary hiccup. The Saudis will eventually have to make it good with a one-off payment to BAe, unless they want a diplomatic row that would make the Death of a Princess affair look like a Sunday picnic.

By contrast, Vickers' problems in defence look ominously intractable, and much longer-term in nature. Sir Colin grasped part of the nettle yesterday by closing the Leeds tank factory and, surprise, surprise, sparing its sister plant in Newcastle. Nothing to do with it being on the doorstep of Tony Blair's constituency, you understand.

But no tank manufacturer is an island and Vickers looks uncomfortably isolated as the carve-up of Europe's armoured vehicles industry gathers pace. It could train its sights on Alvis, which joined forces with GKN this week, and launch a knock-out bid. That would be one way of getting its hands on Alvis's Swedish order book.

But it would bring Sir Colin no nearer the real prize, which is a share in the pounds 3bn "battlefield taxi" contract that Vickers was beaten to by GKN. With Alvis now on board, as well as GKN's German and French partners, there is a limit to how many more manufacturers can join the party.

The alternative alliance partners do not look very enticing. Giat of France has been touted as a potential bride. But it employs 4,000 people to produce the same number of tanks that Vickers will be able to make with a tenth of the workforce once Leeds shuts. Even if Sir Colin could isolate Vickers from the social costs that French industry is saddled with, it still looks like a marriage from hell.

Sir Colin says pluckily that there is pounds 5bn worth of tank business out there and Vickers can win its fair share. But unless Vickers finds a strategy, and quickly, then tanks, like Rolls-Royce Motor Cars before the Germans came along, may begin to resemble another one of those businesses with the ability to shoot down the whole group.