Outlook: Vickers/Giat

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THE BARON from Brussels has pulled off another deal, but will it be enough to get Vickers firing on all cylinders? The agreement to put the group's Challenger tanks business into a joint venture with French tank manufacturer Giat shows that Vickers's chief executive is determined not to be outmanoeuvred as Europe's defence industry consolidates.

But has Baron Paul Buysse picked the best partner? Giat is still state- owned, which means that it is almost certainly not as fighting fit as Vickers's defence business. What's more, the two companies' manufacturing facilities have carefully been left out of the new joint venture, thus depriving them of the opportunity to take out big lumps of cost.

On the other hand, Vickers and Giat will collaborate on the development of new products, which presumably means the next main battle tank for Europe's armies. Meanwhile the Challenger and Giat's Leclerc tank will continue to fight it out for what export orders there are in far-off places where they are still buying such things. As the market now ascribes virtually no value to Vickers defence business - indeed the entire group is not capitalised at much more than its existing cash pile - the Giat deal cannot hurt.

What Vickers really needs is to persuade more of Europe's 20 land-fighting vehicle manufacturers to come to the party. Or better still, an order or two. It is in there battling for tank deals in Greece, South Africa and Qatar. Just one order would lift the shares. Unfortunately, Leclerc is fighting for exactly the same orders, too.