BAE Could Thrive with a Bit of British Intelligence; ANALYSIS

Article excerpt

Byline: Ruth Sunderland Associate City Editor

THE top bosses of BAE Systems bet the future of Britain's biggest defence manufacturer in a high-stakes poker game. It was a gamble they lost in the most humiliating fashion.

Now chairman Dick Olver and chief executive Ian King must pay the price.

Fatal flaws were obvious from the outset in their scheme to surrender BAE on a silver platter to European aerospace giant EADS.

But Olver and King chose to ignore the gaping potholes in their path and sought to steamroller their way over their critics.

It is hard to see how the duo can now lead BAE as a strong, independent British company, which is the only desirable outcome for its employees, shareholders and the nation as a whole.

There was little humility even in defeat. The two companies blamed the collapse on politics and insisted the industrial logic of a merger was 'sound'.

It seems to have escaped their minds that in the aerospace and defence industries, it is impossible to separate political imperatives and industrial logic.

Whatever the Greeks may think of Angela Merkel, the British people owe her a debt of gratitude. She stood firm for jobs and industrial capacity in her country.

It is no thanks to the Coalition that BAE is not heading for reduced status as a junior partner in the EADS behemoth, obeying the orders of an empire-building German chief executive.

But even if Frau Merkel had said 'Ja', BAE would have struggled to win approval from its own shareholders because the industrial logic was, in fact, far from sound.

Neil Woodford, the biggest investor, was a withering public critic and other top ten shareholders had serious reservations. There is every chance BAE would have lost an investor vote.

It had much to lose if events had not followed the script, not least the special relationship with the Pentagon, painstakingly built up over the years. …