British weapons maker BAE Systems PLC on Tuesday said it would eliminate almost 2,000 jobs, slow production of Typhoon combat jets, and streamline operations as its new chief executive comes to grips with a dearth of military plane orders and the need to lower costs.
The bulk of the proposed job losses, around 1,400 positions, would come over the next two years at BAE's military aircraft division that makes Typhoon combat jets and Hawk training planes. Another 375 positions are set to go in the naval services business and 150 jobs would be cut at the Applied Intelligence cybersecurity unit, the company said.
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BAE's actions follow those of its larger counterparts in the U.S. that have shed jobs despite rising defense budgets. Lockheed Martin Corp., the world's largest weapons maker by sales, and Boeing Co. have announced jobs cuts. The companies are responding to pressure from government buyers for lower prices and fierce competition for orders.
BAE Systems employs around 83,500 people principally in the U.K. and U.S. This round of job cuts is focused on its U.K. activities. The company said it was hoping to make the cuts entirely through voluntary redundancies.
Charles Woodburn, who took the top job at BAE in July, said the actions would "align our workforce capacity more closely with near-term demand and enhance our competitive position to secure new business."
BAE Systems for the second time is slowing production of the Typhoon combat plane it builds in conjunction with Airbus SE and Italy's Leonardo SpA. The move is aimed at keeping the production line humming, though at a slower pace, until about 2022 to buy time to win more export orders. At the current rate, production would end in 2019 unless the company secures additional deals.
The British government last month announced it was in talks with Qatar over the sale of 24 Typhoon jets that would be made by BAE. The company also said Tuesday the deal with Qatar could involve the sale of 6 Hawk trainer planes. The Hawk sale hadn't previously been disclosed.
The two-year lead time to make some Typhoon parts means production would have to pause even if a contract with Qatar was signed quickly. Slowing the pace of building planes avoids having to stop and restart production, which can be costly.
The U.K. also is hoping to secure other deals for the twin-engine combat jet, including a follow-on order from Saudi Arabia for around 48 of the planes. Saudi Arabia, which also is buying combat jets from Boeing, already has bought 72 of the BAE aircraft.
Hawk production is also being slowed to buy time to win more orders.
Military aircraft programs represent more than 50% of BAE sales. The company is also a partner to Lockheed Martin on production of F-35 Joint Strike Fighter planes, the Pentagon's most costly weapons program.
Job losses at BAE's plane production unit aren't new. The company cut jobs in 2011 after the British government scrapped plans to buy a new sub-hunting plane from the company. A slowdown in production of its Hawk trainer jet led to more job losses more recently.
Mr. Woodburn also moved to simplify BAE's structure to help lower cost and speed decision making. The new structure will take effect Jan. 1, the company said.
Nigel Whitehead, who heads the company's Programmes and Support operating group, will take on the newly created job of chief technology officer. Mr. Woodburn soon after becoming CEO signaled he wanted to sharpen the company's technology focus.
The company left unchanged its guidance for the year for underlying earnings per share to rise 5% to 10%.
Write to Robert Wall at firstname.lastname@example.org
Corrections & Amplifications
This article was corrected at 1130 GMT because the original misstated the figure as 61,000 in the fourth paragraph. BAE employs around 83,500 people, not around 61,000.
BAE Systems employs around 83,500 people principally in the U.K. and U.S. "BAE Systems to Cut Nearly 2,000 Jobs," at 11:37 GMT, misstated the figure as 61,000 in the fourth paragraph. BAE employs around 83,500 people, not around 61,000.
(END) Dow Jones Newswires
October 10, 2017 06:42 ET (10:42 GMT)