Saturday, June 16, 2007

BAE Gets OK from Congress, Investigation Notwithstanding

In recent years there has been a strong trend toward consolidation in the defense/aerospace sector. But both the Pentagon and Congress have become increasingly concerned that the diminishing universe of defense contractors reduces competition and forces up prices. One notable exception to this trend however, is BAE Systems, which was formed by the merger of British Aerospace North America with Marconi North America, .

BAE North America has effectively shed much of the baggage that limited its ability to compete with Lockheed-Martin, Boeing, and other large home-grown companies. Most notable, perhaps, was BAE's stake in Airbus, and the controversy over government subsidies to that firm. BAE seemed to steer clear of any related repercussions when it sold its stake. Now comes word that the Congressional committees of jurisdiction have consulted with BAE and decided to allow the company to complete the sale of some materials and technologies to foreign governments:

Congressional aides said the House and Senate foreign relations committees had lifted the technology transfer blocks after BAE North America said none of the assets involved was the subject of the abortive investigation by Britain’s Serious Fraud Office, which was probing allegations the company bribed Saudi officials to win work worth billions of pounds over 20 years.

The decision frees up a proposal by Mojave, a BAE business unit, to transfer two A-4N Skyhawk aircraft to the German air force. Other deals involve a technical assistance agreement to upgrade systems on Australian F/A-18 fighter jets, and a plan by BAE and Japanese partner companies to make transponders.

It's interesting that notwithstanding the constant debate over the outsourcing of jobs, and the security threat of importing defense components from foreign firms, Congress is encouraging the increased participation of BAE in the U.S. market. One reason might be that as a company with British origin, BAE is not really seen as foreign, in the same way that a Russian or other firm might. (It must be noted of course, that BAE North America has its HQ in Maryland, so it is technically an American company, anyway.)

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