FACTBOX-Projects that may be hit by European defence cuts

BRUSSELS, July 16 (BestGrowthStock) – With governments across Europe
planning to slash tens of billions of euros from their defence
budgets, major projects are under scrutiny for possible
cancellations or cuts. [ID:nLDE66E235]

Following are some of the military projects that could be
affected, defence analysts say:

BRITAIN

The Ministry of Defence says all hardware programmes are
under review as part of an effort to reduce its 36.9 billion
pound ($56.7 billion) budget by what analysts say could be up to
15 percent. Programmes under scrutiny include:

— Eurofighter Typhoon combat jets, made by Britain’s BAE
Systems (BAES.L: ) together with Italy’s Finmeccanica (SIFI.MI: )
and European aerospace group EADS (EAD.PA: ).

Britain has ordered 160 of the 70-million-pound planes, but
analysts say it may scrap plans to buy an additional 48.

— Britain has already cut its order for the delayed and
over-budget EADS-built A400M transport plane to 22 from an
original 25. The project will be part of its defence review, but
most analysts believe the bulk of orders will be maintained as
Britain urgently needs to update its costly and ageing transport
fleet to support overseas operations.

— Orders for Lockheed Martin Corp’s (LMT.N: ) F-35 Joint
Strike Fighter (JSF) could be vulnerable. British firms involved
in its development include BAE and Rolls Royce (RR.L: ).

— Britain could opt to have just one new aircraft carrier,
instead of the planned two, in a project involving BAE, Babcock
International (BAB.L: ) and Thales (TCFP.PA: ). However, contracts
have already been placed for 40 percent of the cost of the
equipment and materials needed for the ships.

Another option would be to reduce the number of Joint Strike
Fighters for the carriers.

Some analysts say that in a radical shift, Britain might opt
to buy cheaper French Rafale fighters built by Dassault
(AVMD.PA: ), perhaps as part of a deal with France on a British
air-to-air refueling project. However, the Rafale competes
fiercely with Eurofighter. Another alternative to the JSF would
be an upgrade of Britain’s Harrier fleet.

Analysts say the Netherlands, Italy and Norway will also
look at trimming Joint Strike Fighter orders.

— The British government could opt to reduce its
nuclear-armed Trident submarine fleet to three from four, or to
extend the life of the current fleet.

— Britain will also have to decide whether to order more
armoured vehicles from General Dynamics (GD.N: ), after signing a
500-million-pound contract for an initial tranche.

GERMANY

The German Defence Ministry is looking to save up to 9.3
billion euros ($11.9 billion) on procurement projects when it
finalises defence cuts this autumn.

— A preliminary report has recommended big cuts in orders
for the NH90 transport helicopter and the Tiger combat
helicopter manufactured by EADS. Germany has complained about
delays and performance problems with both helicopters.

— Germany may also abandon the purchase of the last partial
tranche of 37 Eurofighters or resell the planes, and abandon the
purchase of the Franco-German-Spanish Talarion EADS drone.

The military is considering reducing its order of 60 A400M
planes to 53, negotiators say. However, this and the British cut
to 22 planes are designed as mechanisms to fund an agreed price
increase in the seven-country plane without putting up new
money, and neither move would result in actual cash savings.

Germany may go along with recommendations to stick to plans
to buy the MEADS missile defence system as a successor to its
Patriot system. Consortium members are Lockheed Martin and EADS,
BAE Systems and Finmeccanica.

FRANCE, ITALY

The two countries have decided to buy fewer Fremm
Multipurpose Frigates designed by DCNS/Armaris and Fincantieri.

Builders are French state-controlled shipyard DCNS, which is
one-quarter owned by defence electronics group Thales and in
Italy by Orizzonte Sistemi Navali, a joint venture of
shipbuilder Fincantieri and Finmeccanica.

According to a source close to the issue, France plans 3.5
billion euros of savings on its defence budget in 2011-2013.
However, the source said the cuts would not affect large
contracts or those involving Rafale planes, Fremm frigates, VBCI
armoured vehicles, Barracuda submarines, Felin infantry combat
systems or France’s programme for the A400M.

NATO

Doubts have been raised about the future of NATO’s biggest
joint procurement scheme, the 1.3-billion-euro Alliance Ground
Surveillance drone project, after Denmark became the latest of
several countries to pull out.

U.S. firm Northrop Grumman ISS International (NOC.N: ) is the
main contractor for the 14-nation project, with the German arm
of EADS, Italy’s Galileo Avionica — a unit of Finmeccanica —
and the Canadian arm of General Dynamics also involved.
(Reporting by David Brunnstrom, Tim Hepher, Sabine Siebold,
Adrian Croft, Mohammed Abbas; Editing by Mark Heinrich)

FACTBOX-Projects that may be hit by European defence cuts