VT BAE Shipbuilding Merger Imminent

The Times newspaper reports that BAE SYSTEMS and VT Group are in the final stages of negotiations to merge their shipbuilding operations into one national champion.

The paper says the process could be completed within five weeks.

It has long been the MoD's wish that shipbuilding in the UK should be consolidated and indeed it has let it be known that a final go-ahead for the long awaited aircraft carrier project would be conditional on such a merger. The paper says it understands the Treasury have agreed to fund the new vessels, at a cost between £3.6 billion and £3.9 billion.

The paper reports that the shipyards in Glasgow and Portsmouth would be given specific remits. The BAE yards in Glasgow would chase orders for larger naval units, whilst VT's facilities in Portsmouth would go after the types of orders recently won with patrol vessels for Oman. The group is also expected to confirm a deal to build three patrol vessel for Trinidad& Tobago, beating Italy's Finmeccanica.

The paper also says that Fleet Services, a joint venture between VT and BAE will be included in the new shipbuilding venture whilst Flagship, a training service for RN personnel will remain independent.

The MoD believes that one national champion of naval build can compete better worldwide for warship orders, utilising combined strengths in experience and technical expertise. Countries that at one time would have almost automatically placed orders with British yards are now sourcing their ships either elsewhere, or building their own vessels.

Meanwhile BAE SYSTEMS is expected to report profits of £1.19 billion for 2006, up from the previous year's £975 million. Observers say this could mean BAE will be in the mood for more acquisitions.

BAE recently won an order for a collaborative project in Malaysia to build frigates. Some technology transfer is thought to be part of the deal. It is unclear just how the work is to be apportioned, however, BAE SYSTEMS, in a statement last year, said that the work would "help sustain several hundred engineering and manufacturing jobs on the Clyde". Assembly is expected to be in Malaysia with sections being built in Glasgow to be towed out.