Westland tipped for MoD order

Westland, desperate to win a £1bn helicopter contract from the Ministry of Defence, cut its price after US rival Boeing said it would spend up to £2bn with British aerospace companies if it won the order.

Boeing, whose Chinook transport helicopter is vying with Westland's EH101, promised to place work worth twice the value of the deal with UK firms if it got an order for between 31 and 40 craft.

"We regard this offset deal as unprecedented in the industry,'' said a Boeing official. "We believe it would have created a couple of thousand jobs and work for between 50 and 100 British companies.''

Boeing's Chinook is cheaper than EH101 and is favoured by the RAF. But the decision is as much political as financial, and the latest speculation is that Westland, owned by GKN, is close to securing the bulk of the order.

The MoD and the Department of Trade and Industry are thought to favour Westland, whose ability to sell the EHI01 for export would be damaged if it was snubbed by Britain.

An MoD spokesman said yesterday that no decision had been made. He described suggestions of an order for 20 to 30 EH101s from Westland, with Boeing receiving a contract for up to10, as pure speculation.

Boeing, whose Chinook production line needs work to replace terminated US military orders, revised its offer last month. The company is offering to provide offsets of 100 per cent for orders of one to 10 helicopters, rising incrementally to 200 per cent.

Westland has cut its price several times, leading one analyst last night to question whether the company would be doing the work at below cost price.

The EH101 is developed jointly with Agusta of Italy and will be the mainstay of Westland's future production. Export potential is estimated at £3bn.

The UK military already has a fleet of 30 Chinooks and the RAF did not want the expense of introducing a different helicopter, which would mean an increase in training and maintenance costs. There have been claims from senior RAF figures - rejected by Westland-- that the rear ramp of the British craft is too steep for vehicles and that the helicopter does not meet requirements.

The American craft can carry an 8.6-ton payload, including 33 to 35 soldiers, compared with the EH101's 7 tons and 30 soldiers. However, the EH101 is better suited to bad weather conditions.

The Cabinet may make its decision as early as next week. The MoD said: "We have always said that the order would come in the first quarter of 1995."

GKN, whose shares rose 5p to 569p, said it had received no new information about the contract.