BAE Systems To Take GBP592 Million Write-Down For Contract Failure
February 15 2010 - 6:32AM
Dow Jones News
U.K. defense giant BAE Systems PLC (BA.LN) Monday said it will
book a GBP592 million write-down in its 2009 accounts after U.S.
authorities confirmed that it hadn't been awarded a follow-on
contract for producing cargo trucks for the U.S. Army.
The U.S. Army on Friday upheld a $3 billion cargo-truck contract
awarded to Oshkosh Corp. (OSK) following a review of protests filed
over the Army's evaluation of bids for the contract by BAE Systems,
the incumbent contractor for the trucks, and Navistar International
Corp (NAV).
Oshkosh was awarded the five-year contract to supply up to
12,415 trucks and 10,926 trailers in August last year, but in
December, the U.S. Government Accountability Office upheld two
protest issues of limited scope dealing with Oshkosh's production
capacity and Navistar's past performance as a defense contractor.
The GAO recommended that Army re-evaluate those parts of the
companies' bids.
The GAO, however, dismissed the majority of the issues raised in
the protests, including complaints that Oshkosh's price for the
trucks is unrealistic and exposes the Army to production disruption
if the company is unable to cover its production costs.
The trucks are part of the Army's long-running Family of Medium
Tactical Vehicles, or FMTV, program. The FMTV series features up to
17 different truck models for a variety of uses with payloads from
2.5 tons to five tons.
BAE's Texas-based Land & Armaments Group and Stewart &
Stevenson Services--a company acquired by BAE--have built more than
56,000 FMTV trucks since 1991. The company has said as many as
3,200 workers in Texas, Michigan and Ohio could lose their jobs
when BAE quits building the trucks.
BAE said the GBP592 million write-down would cover impairment of
goodwill and other intangible assets relating specifically to the
FMTV contract.
At 1049 GMT, BAE's shares were flat in London and 342 pence,
underperforming a 1% rise in the FTSE 100.
-By Steve McGrath, Dow Jones Newswires; 44-20-7842-9284;
steve.mcgrath@dowjones.com
(Bob Tita in Chicago contributed to this article.)
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