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The BBC's Lesley Curwen
"BAE have confirmed that restructuring will result in job losses"
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Wednesday, 10 January, 2001, 14:48 GMT
BAE Systems plunges on grim outlook
Hawk jet
Hawks have hit BAE Systems' performance
UK defence giant BAE Systems has warned of worse-than-expected losses in its military programmes division, amid reports of "sizeable" job cuts at its British factories.

Shares in the company tumbled 25% on the news, reaching a four-year low on the London Stock Exchange before closing at 268.5p.

The provisions are on the top end of expectations and the underlying performance is worse than feared

Tim Bennett
Industry analyst

A spokesman for the company told the BBC that "headcount reductions" during 2001 would be "inevitable", but said the numbers of redundancies and where the cuts would fall was yet to be decided.

While the firm's Airbus programme is buoyant and recruiting more staff in the run-up to the launch of the A380 superjumbo project, its defence business is having a difficult time.

The company - the result of a merger of British Aerospace and Marconi Electronic Systems (then part of GEC, which has since taken on the name Marconi) - is one of the largest makers of military equipment in the world.

Hawk fails to fly

In a trading statement, BAE Systems warned that the military programmes division would be hit by lower than expected orders from the British Ministry of Defence, and a sharp drop in orders for its Hawk jet aircraft.

The company also said it would lose 300m on the contract for the delayed Nimrod aircraft.

For the past year, BAE Systems will take a charge of 400m ($595.5m) and another 115m in 2001.

"The provisions are on the top end of expectations and the underlying performance is worse than feared," said industry analyst Tim Bennett of investment bank Morgan Stanley Dean Witter.

But the company predicted its fortunes would improve in 2002. One important factor for improvements will be projected cash savings as a result of the merger.

So far, the combined firm has saved 100m, and further "synergies" were expected to contribute a further 275m next year.

BAE System's chief executive John Weston said: "We are confident about delivering growth in 2002 and beyond."

The company employs about 120,000 people worldwide.

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