BAE Systems is all set to cut as many as 3,500 jobs from its US shipbuilding business as Pentagon spending cuts threaten maintenance work on navy vessels. The BAE Systems’ job cuts will focus on four locations, with about 70% of US staff involved in ship repair work losing their jobs. Facilities in Norfolk, Virginia and San Diego, California would be hit most severely, with job cuts also possible in Hawaii and Mayport, Florida, BAE Systems announced.
The US Navy has told BAE Systems that work on 13 ships may be affected as it scales back spending to bring activities in line with a reduced budget. The UK defence giant, which in October failed to complete an ambitious merger with European aerospace group EADS, said constrained military budgets had resulted in 2012 sales shrinking 7.2% year on year to £17.8bn.
BAE Systems also announced the launch of £1bn worth share buybacks, but the group warned that it can be achieved only if BAE achieved “a satisfactory resolution of price escalation negotiations” in its delayed attempts to sell 72 Eurofighter Typhoon aircraft to Saudi Arabia.
BAE Systems, which earns 40% of its revenues in the US, also warned that this year’s sales would fall by £1bn should the US Congress implement its budget sequestration with automatic spending cuts of about $85bn (£55.8bn) in the fiscal year 2013, with military spending taking a big hit. In the past four years, BAE Systems shed 26,000 jobs. Following the shares buyback news, BAE Systems shares rose by 3% to 344.3p.