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BAE to cut 2,000 jobs as CEO Woodburn tackles Typhoon fighter order stall

  • Cuts come as Typhoon jet orders slow
  • Will mainly impact plants in Lancashire, northern England
  • Job cuts will also come in maritime, cyber defense units
  • Union says cuts will damage Britain's defense capabilities
A Royal Air Force Eurofighter Typhoon jet
Paul Ellis | AFP | Getty Images
A Royal Air Force Eurofighter Typhoon jet

BAE Systems will shed 2,000 jobs as new chief executive Charles Woodburn tries to shake up Britain's biggest defense contractor in the face of dwindling orders for the Typhoon fighter jet.

The Eurofighter Typhoon has won fewer orders this year than the rival Rafale built by France's Dassault Aviation, as a major order expected from Saudi Arabia has not materialized, although Qatar agreed to buy 24 Typhoon and six Hawk trainer jets in September.

Woodburn, who took over as chief executive in July, plans a major overhaul of the non-U.S. operations of Britain's preeminent defense supplier, including revamping its air and maritime operations and simplifying management structures.

"These changes will drive competitiveness; accelerate technology innovation; and deliver continued improvements in efficiency and operational excellence," the company said in a statement.

Britain's Unite union vowed to fight the "devastatingly short sighted" job losses that it said would undermine the sovereign defense capability of one of the European Union's top two military powers.

BAE, which has been the backbone of Britain's defense industry for decades, employs 34,600 people in the country out of a global workforce of 83,100.

Britain will look to support BAE and its workers, Prime Minister Theresa May's spokesman said. BAE said it will also cut around 375 jobs at its maritime operations, which design the Britain new Dreadnought class of nuclear submarine. Maritime accounted for a quarter of its sales, while its land unit, which builds combat vehicles, accounts for 16 percent.

It will also cut 150 jobs at its Applied Intelligence unit that helps companies and governments fight cyber-warfare.

Defence analyst Howard Wheeldon said the cuts were essentially due to a gap in orders emerging in key programs such as Typhoon and Hawk, and other programs, such as support work for the Tornado jet, also ending soon.

"It is the stamp of a new CEO who has looked across the group and decided where it needs to be heading," he said.

"It takes out a management layer and lays out a new structure and the people for the years ahead."

Defense capability

Just over half of BAE's 19 billion pounds ($25 billion) of sales in 2016 came from its aircraft business, which is also a partner in the F-35 Lightning II combat jet program.

Based on current orders for the Typhoon and Hawk, BAE said it needed to reduce the workforce by up to 1,400 roles.

BAE's Warton and Samlesbury plants will suffer the brunt of the losses as around 5,000 people there work on the Typhoon program, which is a joint project between BAE, France's Airbus and Italy's Leonardo.

The group had already slowed production at two of its plants in Lancashire, northern England, which are involved in building the Typhoon jet.

"These planned job cuts will not only undermine Britain's sovereign defense capability, but devastate communities across the U.K. who rely on these skilled jobs," said Steve Turner, assistant general secretary of the Unite union.

BAE said in August that any new orders were unlikely to impact production delivery rates positively for at least 24 months, and production would be under constant review.

"We obviously have to review our (Typhoon) production demand very carefully," Woodburn said at the time.

The company said on Tuesday that discussions with current and prospective operators of the Typhoon continued to support its expectations for future contract awards.

The company said the reorganization, which does not affect its U.S. managed business, did not change its outlook for the year.

It said it still expected its underlying earnings per share to be 5 percent to 10 percent higher than full-year underlying earnings per share in 2016 of 40.3p and it continued to expect a small reduction in net debt compared with 31 December 2016.

Shares in the group were trading down 0.5 percent at 616 pence at 1134 GMT.