BAe sets out deal with Saab set out

British Aerospace yesterday revealed details of a joint marketing and manufacturing venture with Saab, covering the Swedish company's Gripen combat aircraft.

At the same time Matra, the French defence company, said there was no doubt that a merger of its missiles business with British Aerospace's Dynamics Division would go ahead.

The Saab deal and the Matra talks are important for BAe's strategy of pan-European co-operation to cut costs in a world of declining defence orders.

BAe's widely expected partnership with Saab is to market, adapt and manufacture the company's Gripen fighter for export.

John Weston, chairman of BAe's defence division, denied the deal was a way for Saab to evade Sweden's strict embargo on arms exports to repressive regimes. He said: "We are not expecting this deal to circumvent anything. Our export markets will be subject to the regulations of the two countries."

Mr Weston believed there would be demand for 1,200 Gripens in the short term, worth a total of $6bn to $8bn, in Eastern Europe, the Middle East and South America.

BAe's prime role will be to market the Gripen and work on its adaptation for different customers and climatic conditions.

BAe will have 45 per cent of the partnership and Saab the rest, and no money will change hands. Some manufacturing work on the air frames will come to BAe's factories in the UK, though no final decisions on which parts have been made.

Nor has it been decided which company will do the crucial final assembly work. Details will be discussed over the next two to three years, with exports of the first aircraft expected by the turn of the century.

The Gripen, a mid-range fighter, fits neatly between BAe's current Eurofighter 2000 programme and its low-cost Hawk aircraft.

Meanwhile, in a speech designed to dispel growing doubts about further delays in a missile tie-up, Noel Forgeard, chief executive of Matra, said negotiations with BAe had gone too far to turn back. "There are no stumbling blocks," he said.

But neither company yesterday would confirm suggestions that under the deal BAe had agreed to give Matra pounds 50m on completion, and up to pounds 100m over the next decade. BAe would put some cash into the deal, Matra said but would give no details.

A Matra spokesman said an agreement with BAe had been reached for a 50- 50 joint venture but the respective governments had not approved the deal. An announcement is not expected until the autumn.

Mr Forgeard said: "For both countries there are questions of national security."

He hinted that issues under discussion at the political level concerned US components used by Matra and BAe and also the French company's close links with Daimler-Benz of Germany. But the main sticking point is a French demand that the UK award an order for air-to-ground missiles to the merged company. The UK government says this order should not be an issue.

However, Mr Forgeard was confident the politicians would resolve their differences. "With the crisis in Bosnia, never have the French and UK governments been so close politically and militarily, but also industrially."