Rationalisation Statement

BAE Systems PLC
15 June 2000


BAE SYSTEMS RATIONALISATION

15th June 2000
 
The formation of BAE SYSTEMS at the end of November last year created a truly
global systems, defence and aerospace company that has the financial strength,
large scale capability and worldwide scope to take on the most challenging
projects.

Recent announcements by the UK Government have added further strength to the
company's position and particularly its manufacturing base. 

Of the 22,000 jobs arising from the A3XX project for which the Government has
pledged support and launch funds, some 8,000 will be in BAE SYSTEMS. 

The A400M military airlifter programme will create 10,000 jobs of which 3,400
will be at BAE SYSTEMS sites.  

The Meteor Beyond Visual Range Air-to-Air Missile (BVRAAM) contract will help
support our Matra BAe Dynamics joint venture and will safeguard 1,200 jobs
there. 

All these significant  boosts to employment will secure the future for our
employees,  but because of lengthy development periods the impact will not be
felt immediately.

There is now a real requirement to ensure we remain highly competitive,
capture the synergies arising from the merger and achieve profitable growth in
the business.  Accordingly, the company has conducted a rigorous review across
all aspects of the UK business and the outcome of this work is seen as the key
to delivering improvements that will further reinforce our secure base. 

John Weston, Chief Executive of BAE SYSTEMS, said today: 'We will continue to
protect our core competencies and manufacturing capabilities in the UK, and
retain key disciplines and resources - particularly in scarce skill areas. We
plan to recruit around 2,000 engineers over the next 18 months in specific
areas such as Systems and Software Engineering and around 1,000 people in the
next two years through our Young People recruitment programmes.

'Based on the outcome of the review it is now clear that there are savings to
be realised. There are a number of areas in the UK in which the company has
overlapping product capabilities, duplication of facilities and resources and
opportunities to improve efficiency and consolidate activities.  Savings
across all areas of overhead in wholly owned operations in the UK have also
been identified.' 

The effect of this programme will be the equivalent of 3,800 job losses. The
company's Group and Programme Managing Directors and their teams will be
communicating and consulting on the impact on individual locations over the
next few days. 

The company currently has over 60 operating sites across the UK, and from the
work that has been done to date it has been concluded that the activities at a
number of them will have to cease, be transferred and consolidated or be
reviewed. The sites immediately affected are: -

York (Avionics).  The York site is planned to close in the final quarter of
2000 with the loss of approximately 50 jobs. 

Ilford (Avionics). The activities at Ilford will be consolidated and
transferred to Rochester and Basildon.  As a consequence the Ilford site will
close in the first quarter of 2001.

The Blackburn ROVIS operation (Avionics) will be consolidated and transferred
to new facilities in the same area.

The activities at Edinburgh South Gyle 2 (Avionics) will be consolidated at
the neighbouring Edinburgh sites.

The future viability of the RO Defence Nottingham site is under review. There
are currently 390 jobs at Nottingham.

The remainder of the 3,800 equivalent job losses will be dispersed across
other wholly owned UK locations.

John Weston said: 'Decisions that affect jobs and sites in this way are
regrettable and only arrived at after very careful consideration. We hire
around 4,000 new people each year as our people retire, or leave for personal
reasons, and we have areas of growth so we will have opportunities to offer
staff who are prepared to move and retrain.  We are committed to minimising
the effects of this programme by offering a comprehensive range of measures.'

These measures will include selective voluntary redundancy programmes, early
retirement and the release, where possible, of on site sub contract labour. 
We are looking at re-deployment opportunities, re-location assistance and the
launch of a new re-skilling programme.  Furthermore we will restrict our
overtime working, recall work from sub-contractors where it is practical and
economically viable to do so and release temporary and fixed term staff
undertaking types of work which could be done by affected employees.  

The company will be consulting with the trade unions and employee
representatives and individual employees to minimise compulsory redundancies.

As part of this announcement it must be recognised that there are areas of the
business that face potentially significant workload problems over the coming
months.  At Brough there are several Hawk export prospects but securing them
will be important to the numbers employed there - the existing and planned
orders are insufficient to maintain the current workforce.  This situation is
taken into account in this announcement.  At Govan the future of the shipyard
and the employees will inevitably be linked to the outcome of the UK
Government's decision on the strategic sealift (Ro-Ro) contract.
 
'We are operating in a highly competitive global market and we will continue
to review our performance at all sites in order to maintain our
competitiveness,' said Mr. Weston.  'Each business area will address the
impact on jobs of workload and performance, and consultation on potential job
losses will take place on a local level.  Our operations in other countries
are subject to separate reviews and the outcome of these will be announced in
due course.'