BAE Systems Inc.

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Not to be confused with BEA Systems, Inc., an enterprise software company.

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BAE Systems Inc.
Subsidiary
Industry Aerospace and defence
Founded November 30, 1999
Headquarters Arlington, Virginia, United States
Key people
 Gerard "Jerry" DeMuro (President & CEO)
Products Civil and military aerospace, naval vessels, munitions, land warfare systems, others
Number of employees
 52,000 (2009)
Parent BAE Systems
Subsidiaries BAE Systems EI&S
BAE Systems Land & Armaments
Website www.baesystems.com

BAE Systems Inc. (formerly BAE Systems North America) is a wholly owned subsidiary of the British defence and aerospace company BAE Systems plc. As per its Special Security Agreement, BAE Systems Inc. operates as a semi-autonomous business unit within BAE Systems controlled at a local level by American management.

BAE has described the rationale for expansion in the US; "[it] is by far the largest defence market with spend running close to twice that of the Western European nations combined. Importantly, US investment in research and development is significantly higher than in Western Europe." The company's 2004 strategy review confirmed a "strategic bias" for expansion and investment in the US. In 2007 BAE Systems Inc. had sales of £7,454 million and EBITA of £741 million. These represent 46% and 45% respectively of BAE Systems' group results.[1]

History

The company was created on November 30, 1999. On this date Marconi Electronic Systems (MES) and British Aerospace (BAe) merged to form BAE Systems. Their respective subsidiaries in the USA, Marconi North America and British Aerospace North America, were similarly merged to form BAE Systems North America.

In the company's 2003 Annual Report the Chairman sums up BAE Systems' strategy since the merger; "In recent years BAE Systems has undergone a radical transformation from a UK-based aircraft manufacturer to a broadly-based systems business. Through this transformation the company has achieved a more balanced portfolio and geographic spread."

BAE Systems North America was renamed BAE Systems Inc. in 2005 following a major reorganisation of BAE Systems plc as a result of the Eurosystems (SELEX Sistemi Integrati) and UDI transactions.

Expansion

BAE has described the rationale for expansion in the US; "[it] is by far the largest defence market with spend running close to twice that of the Western European nations combined. Importantly, US investment in research and development is significantly higher than in Western Europe."[2] When Dick Olver was appointed Chairman in July 2004 he ordered a review of the company's businesses which ruled out further European acquisitions or joint ventures and confirmed a "strategic bias" for expansion and investment in the US.[3]

In 1999 the most significant part of the newly created BAE Systems North America was Tracor, which was acquired by Marconi North America in 1998. Since 1999 almost all of BAE Systems' growth has been concentrated in the US. BAE Systems North America has grown to the point where its sales to the (American) Department of Defense have surpassed those of its parent to the (British) Ministry of Defence. BAE Systems is now by far the largest foreign investor in the US defence industry. With the political and military ties that exist between the US and the UK, BAE Systems has faced little opposition to acquisitions of important US defence contractors. In April 2000 BAE purchased Lockheed Martin Control Systems (LMCS), a manufacturer of electronic controls for aircraft, space vehicles and the transportation industry for $510 million USD. LMCS was renamed BAE Systems Platform Solutions. In November 2000 BAE Systems purchased Lockheed Martin Aerospace Electronic Systems, a defence systems company which encompassed Sanders, Fairchild Systems and Lockheed Martin Space Electronics & Communications. Following an internal reorganisation the division became BAE Systems Electronics & Integrated Solutions (E&IS). This acquisition was described by John Hamre, CEO of the Center for Strategic and International Studies and former Deputy Secretary of Defense, as "precedent setting" given the advanced and classified nature of many of that company's products.[4]

In December 2002 BAE Systems completed its acquisition of Condor Pacific, Inc. for $58.5 million. Condor Pacific was a manufacturer of sensors and guidance systems for the aerospace industry.[5]

In 2003 BAE Systems acquired Advanced Power Technologies, Inc (APTI), a data exploitation company and provider of communications and networking solutions, for $27 million. APTI was merged into E&IS. In March 2003 BAE Systems acquired MEVATEC, a provider of "professional technical services", which was renamed BAE Systems Analytical & Ordnance Solutions.

In 2004 BAE Systems purchased STI Government Systems,a provider of "photonics, information technologies, system integration ...and a variety of services to other government agencies in areas such as pollution mapping and search and rescue."[6] STI is now part of the CNIR division of BAE Systems E&IS. In August 2004 BAE Systems acquired Boeing Commercial Electronics (now part of the Platform Solutions unit of BAE Systems E&IS). In September 2004 BAE announced the acquisition of the technology company DigitalNet Holdings Inc. The deal was completed on October 25, 2004 for approximately $600 million and the company was merged into the newly created BAE Systems Information Technology.[7] Also in September 2004 BAE announced it was to acquire ALPHATECH, a Massachusetts-based image and signal processing company.[8] ALPHATECH was renamed BAE Systems Advanced Information Technologies.

On March 7, 2005 BAE announced the acquisition of United Defense a major manufacturer of combat vehicles, artillery and naval guns.[9] The acquisition received regulatory approval from the Committee on Foreign Investment in the United States on April 18, 2005 and was completed on June 24.[10][11] United Defense was merged into the newly created BAE Systems Land & Armaments operating group.

BAE Systems announced the purchase of Armor Holdings, a Florida-based manufacturer of military, law enforcement and personnel safety equipment on May 7, 2007. Following regulatory and shareholder approval, the acquisition was completed on July 31, 2007 for approximately $4.532 billion.[12] BAE has received large contracts as a result of the UDI and Armor Holdings acquisitions; for example $1.1bn worth of refurbishment and upgrading work, an order in January 2008 for medium mine-protected vehicles (MMPVs) which could earn up to $2.3bn, and a $2.24bn contract for mine-resistant ambush-protected (MRAP) vehicles in December 2007.[13]

On December 12, 2007, BAE announced the acquisition of Dayton, Ohio-based MTC Technologies. The purchase was finalised in June 2008.[14]

Products

BAE's $4.2 billion purchase of United Defense in 2005 added the M2/M3 Bradley family of armoured vehicles to its product line.

The company's Electronics, Intelligence & Support business group provides communication, electronic identification, navigation and guidance systems, network-centric warfare solutions and support services. Such products include the Electronic warfare systems for the F-22 Raptor and F-35 Lightning II fighters, missile defence systems, countermeasures for both military and commercial aircraft and the HybriDrive propulsion system.[15]

BAE Systems Land & Armaments manufactures armoured combat vehicles, tactical wheeled vehicles, naval guns, missile launchers, artillery systems and munitions as well as providing support and upgrade of its products.[15]

Organization

BAE Systems Inc, which was formerly composed of the BAE Systems Land & Armaments and BAE Systems Electronics, Intelligence & Support groups, was reorganized in mid-2010. The new structure is composed of two sectors and four business units. The Products Sector is made up of the Electronic Systems and Land & Armaments units, while the Service Sector is composed of the Intelligence & Security and Support Solutions units.

Financial information

Yr ending Turnover (£ million)  % of group turnover EBITA (£m)  % of group EBITA
2009 12,375 55.2% 1,178 53.1% [16]
2008 10,866 58.6% 1,072 56.5% [17]
2007 7,453 47.4% 741 50.2% [15]
2006 6,122 44.5% 597 49.5% [18]
2005 4,967 32.2% 366 31.0% [19]

Corporate governance

Jerry DeMuro replaced Linda Hudson as appointed Chief Operating Officer, BAE Systems plc, and President and CEO of BAE Systems Inc. in January 2014.

As per its Special Security Arrangement, BAE Systems Inc. operates as a semi-autonomous business unit within BAE Systems controlled at a local level by American management. In May 2006 the CEO of BAE Systems described the "firewalled" status of BAE Systems Inc: " The British members of the corporate leadership, me included, get to see the financial results; but many areas of technology, product and programme are not visible to us.... The SSA effectively allows us to operate in the US as an American company, providing the highest levels of assurance and integrity in some of the most sensitive fields of national security provision."[20]

BAE Systems Inc. directors are Jerry DeMuro, Tom Arseneault, Dan Gobel, DeEtte Gray, Erwin W. Bieber, Frank Pope, Douglas Belair, Ian T. Graham, Frank Ruggiero, Guy Montminy, Curt Gray, Nick Ruscio, and Kristie Cunningham.

References

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