1. Mahindra Group & BAE Systems join hands again

Mahindra Group & BAE Systems join hands again

Two years after BAE Systems pulled out of a joint venture with Mahindra Group, both companies have reportedly joined hands again to make M 777 Ultra Light Howitzers...

By: | New Delhi | Published: June 27, 2015 12:12 AM

Two years after BAE Systems pulled out of a joint venture with Mahindra Group, both companies have reportedly joined hands again to make M 777 Ultra Light Howitzers (ULH) for the defence forces. Manufacturing components with an Indian partner for a 1,000-gun order would benefit BAE Systems.

Sources said BAE Systems CEO Ian King will visit India next week to formally announce the joint venture.

BAE Systems and Mahindra Group had formed a joint venture — Defense Land Systems India (DLSI) — that focused on the Future Infantry Combat Vehicle (FICV) competition. However, the British company parted ways in Feburary 2013.

The UK-based company, through its US arm, in an effort to resurrect the dead deal, had earlier this year offered to build more components in India for the 155-mm/39-calibre M777 ULH. It had offered the transfer of the assembly, integration & test (AIT) capabilities to India.

The AIT facility will not only provide in-country support to the Army on its weapon system, but also begin the process of indigenous manufacture of modern artillery in India.

Due to delays on part of New Delhi in finalising the deal for M777 guns through the foreign military sales (FMS) route from the US, the company has been gradually shutting down its facilities at Barrow-in-Furness, UK, and work at the US facility too has been suspended. This means that India buys the guns from the Pentagon, which negotiates terms with BAE Systems.

Earlier this year, King had said that, “The M777 (deal) is under the FMS route of the US government. It is a government-to-government arrangement and, in terms of the final assembly, it will be done here.”

The UK facility produces  core components like titanium forgings and fabrications, which make the M777 light enough to be lifted by helicopters to high-altitude deployment areas and it is finally assembled at BAE Systems’ Hattiesburg facility in the US.

Though the facility is suspended in Hattiesburg, the IPR is owned by the UK. “Therefore, we are looking forward to closing the deal with New Delhi,” Bob Preedy, head of Artillery Business Development, L&A Weapons System, told FE.

Simultaneously, BAE Systems has also assured the MoD that the price of the M777 ULH, which would have a lot of indigenous components, would be reasonable.  Since 2010, when the Pentagon had quoted $647 million (Rs 4,015 crore) for 145 guns in a Letter of Acceptance (LoA) to the MoD, this went up to $694 in March 2013.

The conclusion of the M777 deal between India and the US would enable BAE Systems to make a significant long-term investment in the domestic industrial complex and develop an Indian supply chain for its air, land and sea programmes, both locally and globally.

BAE was in talks with several Indian companies, including L&T,  Tata Power (Strategic Engineering Division), Punj Lloyd, Ordnance Factory Board (OFB), Kalyani Group, Mahindra Group and others. BAE has signed agreements with a raft of companies to discharge its offset liability in the M777 contract, worth Rs 1,400 crore. Most of this is believed to be unrelated to the M777.

Gun plan
* BAE Systems CEO Ian King will visit India next week to formally announce the JV
* BAE Systems and Mahindra Group had formed a JV — Defense Land Systems India — that focused on the Future Infantry Combat Vehicle
* The AIT facility will not only provide in-country support to the Army on its weapon system, but also begin the process of indigenous manufacture of modern artillery in India

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