BAE Systems sues South Korea over canceled contract

BAE Systems has announced they are filing a suit in US District Court, claiming that the South Korean military purchasing agency is demanding $43M after canceling an upgrade for their F-16s. South Korea signed the deal with BAE, worth a potential $1.7B, through the Foreign Military Sales office to upgrade 143 F-16s with new radars and avionics.

The FMS office told the Korean government that the cost could increase as much as $800M in August, $473M to the FMS office, the rest to BAE Systems. BAE claims that when the Koreans couldn't bring that cost down, they instructed the FMS office to cancel the deal. When the contract was signed, BAE provided a Guarantee of $43.25M, if it failed to complete certain actions during the Bid phase. According to BAE that phase is long completed, but DAPA is still insisting on payment of that Guarantee.

BAE Systems claims South Korea’s military purchasing agency is shaking the company down for $43 million following a canceled deal to upgrade the nation’s fleet of Lockheed Martin F-16 fighters and has filed suit in US district court to avoid payment.

South Korea on 5 November terminated a Foreign Military Sales contract with BAE to upgrade its F-16 fighters, a deal potentially worth $1.7 billion. The company saw the FMS deal as a huge win in the competition with Lockheed to upgrade the thousands of F-16s currently in service worldwide.

BAE Systems’s contract would have seen 134 aircraft receive new avionics and an active electronic scanned array (AESA) radar produced by Raytheon. The company alleges that South Korea killed the deal because BAE failed to secure a sufficiently low price through the US foreign military sales process. BAE is not seeking reinstatement of the contract.

www.flightglobal.com...

originally posted by: Zaphod58
BAE Systems has announced they are filing a suit in US District Court, claiming that the South Korean military purchasing agency is demanding $43M after canceling an upgrade for their F-16s. South Korea signed the deal with BAE, worth a potential $1.7B, through the Foreign Military Sales office to upgrade 143 F-16s with new radars and avionics.

The FMS office told the Korean government that the cost could increase as much as $800M in August, $473M to the FMS office, the rest to BAE Systems. BAE claims that when the Koreans couldn't bring that cost down, they instructed the FMS office to cancel the deal. When the contract was signed, BAE provided a Guarantee of $43.25M, if it failed to complete certain actions during the Bid phase. According to BAE that phase is long completed, but DAPA is still insisting on payment of that Guarantee.

BAE Systems claims South Korea’s military purchasing agency is shaking the company down for $43 million following a canceled deal to upgrade the nation’s fleet of Lockheed Martin F-16 fighters and has filed suit in US district court to avoid payment.

South Korea on 5 November terminated a Foreign Military Sales contract with BAE to upgrade its F-16 fighters, a deal potentially worth $1.7 billion. The company saw the FMS deal as a huge win in the competition with Lockheed to upgrade the thousands of F-16s currently in service worldwide.

BAE Systems’s contract would have seen 134 aircraft receive new avionics and an active electronic scanned array (AESA) radar produced by Raytheon. The company alleges that South Korea killed the deal because BAE failed to secure a sufficiently low price through the US foreign military sales process. BAE is not seeking reinstatement of the contract.

www.flightglobal.com...

I am sure The British Government will compensate BAE for loss of earnings. One of their "Pals in The City Of London "

originally posted by: alldaylong

I am sure The British Government will compensate BAE for loss of earnings. One of their "Pals in The City Of London "

The major shareholders in BAe Systems plc (the arms-length parent company of BAe Systems Inc that operates in the USA) are:

Invesco - HQ's in alabama
Capital Group Companies - HQ's in LA
Blackrock Inc - NYC
Franklin Investments - also NYC
AXA - the French insurance firm
- each of these firms have about 5% or more (Franklin has 4.92%)

2 British firms - Barclays and Silchester have about 4 and 3% respectively.

Looks mostly like a US firm to me.

a reply to: Aloysius the Gaul

It's kind of an interesting situation. It's part of the UK BAE corporation, but since it's in the US, and has sales to the DoD, it's required to be owned by US executives, as part of the Special Security Arrangements. They actually have more sales to the DoD than they do to the MoD.

originally posted by: Aloysius the Gaul

originally posted by: alldaylong

I am sure The British Government will compensate BAE for loss of earnings. One of their "Pals in The City Of London "

The major shareholders in BAe Systems plc (the arms-length parent company of BAe Systems Inc that operates in the USA) are:

Invesco - HQ's in alabama
Capital Group Companies - HQ's in LA
Blackrock Inc - NYC
Franklin Investments - also NYC
AXA - the French insurance firm
- each of these firms have about 5% or more (Franklin has 4.92%)

2 British firms - Barclays and Silchester have about 4 and 3% respectively.

Looks mostly like a US firm to me.

That's just The U.S. arm of the Business.

BAE is an abbreviation for BRITISH AEROSPACE ELECTRONIC Systems.

en.wikipedia.org...

BAE systems is no more a U.S. firm than is Volkswagen.

a reply to: alldaylong

That's just The U.S. arm of the Business.

No - read it again - that is the shareholding of BAe Corporation - the parent company.

originally posted by: Aloysius the Gaul

a reply to: alldaylong

That's just The U.S. arm of the Business.

No - read it again - that is the shareholding of BAe Corporation - the parent company.

I don't need to read anything again.

The British Government has a " Golden Share " in BAE System which out votes all other shareholders.

en.wikipedia.org...

Also any non - British investor cannot own more than 15% of the company. Also non - British nationals cannot hold any of the top jobs in the company.

www.bbc.co.uk...

So your claim that BAE systems is not a British company is total nonsense. And what non British company would be called BRITISH Aerospace Electronic systems. The ownership of the company is in the name. It's what it says on the tin

a reply to: alldaylong

Nonetheless all the biggest shareholders are US-based companies...

The US Govt insists that BAe Inc (the American arm) cannot be run from London - it is an independent body or else it cannot supply the US military.

And it is the US body that is taking this action, not the parent body.

Over to you for your continued conspiracy nonsense.....

originally posted by: Aloysius the Gaul
a reply to: alldaylong

Nonetheless all the biggest shareholders are US-based companies...

The US Govt insists that BAe Inc (the American arm) cannot be run from London - it is an independent body or else it cannot supply the US military.

And it is the US body that is taking this action, not the parent body.

Over to you for your continued conspiracy nonsense.....

Let me make this simple for you.

The U.S, arm of the business is a " subsidiary" of the U.K. parent company.

Definition of subsidiary

(Of a company) controlled by a holding or parent company:

www.oxforddictionaries.com...

To confirm BAE System inc is a subsidiary

en.wikipedia.org...

Therefore the U.S. subsidiary is controlled by the U.K. parent

The British Government holds the " Golden Share " in the company which out votes every other shareholder combined.

Therefore if The U.K. Government wanted to pull the plug on The U.S. arm of the business there is nothing anyone could do. They more or less control whats does or doesn't happen.

Living in the U.K. we know more about how BAE Systems operates as it is quite often in our news. A German/ French joint venture wanted an interest in the company and the U.K. Government vetoed.

originally posted by: alldaylong
The British Government holds the " Golden Share " in the company which out votes every other shareholder combined.

Only in certain areas around changing the way the company functions. This includes preventing the company being taken over by a foreign concern.

BAE is a global company with many stakeholders, but as you say, the company is British.

Regards

In the latest twist in this one, DAPA has filed a counter lawsuit for failure to complete the upgrades to their F-16s.

That's just The U.S. arm of the Business.

BAE is an abbreviation for BRITISH AEROSPACE ELECTRONIC Systems.

No it isnt, BAe was British Aerospance and merged with Marconi Electric Systems. They kept the BAE and SYSTEMS but BAE is no longer an acronym for anything.

originally posted by: Aloysius the Gaul
a reply to: alldaylong

Nonetheless all the biggest shareholders are US-based companies...

The US Govt insists that BAe Inc (the American arm) cannot be run from London - it is an independent body or else it cannot supply the US military.

And it is the US body that is taking this action, not the parent body.

Over to you for your continued conspiracy nonsense.....

Sorry Zaph, I guess this is going off thread.

As someone who works with BAE at DSTL I'll settle it and then hopefully we can get back on thread?

BAE SYSTEMS is a UK business, registered on the LONDON stock exchange. The largest share holders are actually investment funds and there are many of them, from all over the world, not single entities. BAE have a British Chairman and CEO, all but two members of the board are British, a British HQ and the majority of BAE income is in to the PLC (A British institution). BAE Inc is NOT an independent body, it is a wholly owned subsidiary of BAE PLC. BAE Inc's CEO, Jerry Demurro reports in to Ian King, the PLC CEO, King also sits on the US Board. The US government enforce no such policy, although a US presence is required to do business for the US Gov, especially when considering ITAR regs.

Suggesting that because a lot of the stock of a global, publicly traded business is owned by foreign companies means that that the business is not a UK business is just like saying that because the two largest owners of U.S debt are China and Japan, that the U.S is no longer American! When all is said and done the UK Government will always be BAE's ultimate master, unless the EADS merger ever comes off!! paaaahahaha

Back on topic -

I know there are people in Nashua and Merrimack that are smarting over this, it was a big deal to lose. They should have chucked a few Rolls-Royces in on the deal......sssshhhh tut tut.

Cheers Robbie