Vickers fears for pounds 3bn bid

A specification change could lose an armoured car contract to a rival

VICKERS, the defence company, has admitted it is concerned about reports that it may have lost a contract to manufacture Europe's next generation of wheeled armoured vehicles. The fear is that the buyers of the vehicles have changed the specifications desired and not informed the company.

The pounds 3bn pound contract, to provide as many as 6,000 armoured vehicles to the German, French and British armies, is being contested by two consortia. Vickers is bidding with the UK's Alvis, Henschel Wehrtechnik and Kuka Wehrtechnik of Germany and France's Panhard.

There was speculation last week that the three governments will next month choose a rival consortium made up of Britain's GKN, France's Giat and Arge GTK and a German grouping of Krauss Maffei, Rheinmetall, MaK and Wegmann, which has provided an eight-wheeled vehicle.

Vickers says it understood it was bidding to build a six-wheeled vehicle. The company has yet to receive a clear answer from the Ministry of Defence on the issue, despite attempts by senior executives. "We would be concerned to find that the specification had been changed," said a spokeswoman . "We are actively and urgently trying to establish what the situation is."

The contract is seen by Vickers and by industry analysts as a key to defining the future of Europe's wheeled armoured vehicle industry, which they expect to consolidate.

The market in Europe is worth about pounds 1.5bn a year and is pretty crowded. Dieter Hanel, a German defence industry expert, said there were 37 companies in Europe capable of producing armoured vehicles.

The armoured car contract also has added importance as a litmus test for European co-operation, as the industry faces competition from the fewer but larger US players.

The unsettling news for Vickers comes at a sensitive time. In October the company put its Rolls-Royce car division up for sale as part of its blueprint to slim down to its core military activities. Various possible buyers have emerged, including a group of concerned British Rolls owners. But the serious bidders - led by BMW, Mercedes and Volkswagen - have been jockeying to avoid paying a high price.

At the Belgian motor show in Brussels last month, BMW chairman Bernd Pischetsreider said: "I know precisely what I am prepared to pay for Rolls- Royce." However, he added: "It is possible that I already have an alternative."

In December, Vickers sold its medical units division to Oxford Instruments and to Hillenbrand Industries of the US for a combined pounds 72.5m, announcing that it planned to concentrate on its Cosworth automotive engineering unit, defence and pro-pulsion technology, tanks and engines.

"The sale of these businesses, coupled with other de-investments announced in recent months, forms a major part of our strategy to concentrate our management and investment resources on those businesses considered to be key to the continued growth of Vickers," company chairman Sir Colin Chandler said at the time.

The news that the GKN consortium may now have an edge over the Vickers group for the pounds 3bn European armoured car contract will be a particularly bitter blow for the company.

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