Westland/Agusta get global muscle

Defence industry consolidation took a major step forward last week after GKN announced plans to merge its Westland helicopters subsidiary with Italian partner Agusta. The tie-up, which will safeguard more than 4,800 UK aerospace jobs, will create a 50/50 joint venture company between GKN and Agusta’s parent, Finmeccanica, with a 20% share of the world […]

Defence industry consolidation took a major step forward last week after GKN announced plans to merge its Westland helicopters subsidiary with Italian partner Agusta.

The tie-up, which will safeguard more than 4,800 UK aerospace jobs, will create a 50/50 joint venture company between GKN and Agusta’s parent, Finmeccanica, with a 20% share of the world helicopter market.

The combined order book will be worth £5.3bn with products for virtually every military and civil application.

The backbone of the deal would be the two companies’ long-standing relationship in developing the EH101 three-engined medium-lift helicopter. Some 98 EH101s have been ordered by the Royal Navy, the RAF, the Italian Navy and the armed forces in Canada and Japan.

Both companies said their assets would be contributed on a broadly debt- and cash-free basis.

The merged group will have a combined workforce of 10,000 with a management team staffed equally by GKN and Agusta executives and headed by David Wright, managing director of GKN’s aerospace division.

The agreement to set up the joint venture is the second major restructuring move by GKN. The company sold its armoured vehicles operation to Alvis last year.

Defence Secretary George Robertson hailed the deal as creating a major force in helicopter production to rival US manufacturers. ‘There is an urgent need to restructure Europe’s aerospace and defence industry to ensure that it can compete more effectively in global markets,’ he said. ‘This is an important step in the consolidation process.’

The move comes 13 years after a row over Westland’s future threatened to destabilise Margaret Thatcher’s government. The Agusta deal is the European option favoured by the then defence secretary Michael Heseltine, but he was overruled by Thatcher.

US helicopter manufacturer Sikorsky eventually took a stake in Westland after a Cabinet row which led to Heseltine’s angry resignation.

The company came back under British control 12 years later in 1994 when GKN bought out the Americans’ share.

The world’s largest helicopter maker is Eurocopter, a Franco-German alliance with 30% of the market, ahead of both US makers Sikorsky and Boeing.

* Interview, page 14