Copter Firm’s Bail-Out Splits British Cabinet

A decision on whether a British defense contractor should be rescued from financial collapse by a European or an American-led consortium has led to a bitter public split in Prime Minister Margaret Thatcher’s Cabinet and clouded the company’s future.

At stake is the fate of Westland, Britain’s only producer of military helicopters. Westland, headquartered in Yeovil, about 220 miles west of here, ran into severe financial problems earlier this year after an abortive attempt to diversify into commercial sales.

Also involved in the controversy is the prestige of two Cabinet ministers who have clashed over the affair, Defense Secretary Michael Heseltine and Secretary for Trade and Industry Leon Brittan.

$108-Million Offer

Until mid-December, it appeared that Westland would be rescued by an injection of $108 million from a consortium led by United Technologies of Hartford, Conn., and Fiat of Italy. United Technologies’ Sikorsky division is one of the world’s largest producers of helicopters.

In early December, the Westland board of directors was reported to be ready to recommend to its shareholders, after reviewing a less attractive offer from a European consortium, that they accept the United Technologies bid. This would give the American producer a 30% holding in Westland and direct access to important Western European markets.

But Heseltine undertook a one-man campaign against the deal. In a dramatic 11th-hour counteroffer, apparently put together at Heseltine’s urging, a group of three Western European helicopter builders--West Germany’s Messerschmitt-Boelkow-Blohm, Aerospatiale of France and Agusta of Italy--entered a revised bid of $109.5 million for a similar stake in Westland. In addition, the European consortium added two members, both British: British Aerospace and General Electric, a company that is independent of the American company with the same name.

Because Westland is a privately owned company, the eventual decision on its future lies with its stockholders. They are scheduled to decide at a special meeting Jan. 14. But because Westland is Britain’s only producer of military helicopters, the decision has important political overtones, and government lobbying has been intense.

Thatcher and Brittan had at first spoken up in favor of the American bid, describing it as the best commercial offer available and one that would ensure the company’s future. United Technologies’ involvement also seemed to make good technical sense, because Westland has produced Sikorsky helicopters under license since the late 1940s.

Guaranteed Work

The proposal guaranteed 1 million man-hours of work over the next three years, but the European firms have offered nearly twice that, plus more money and participation in future joint-European development projects.

Westland Chairman Sir John Cuckney has asked for clarifications about the European offer from the Ministry of Defense and the investment bank acting for the group, Lloyds Merchant Bank, the Associated Press reported Monday.

Westland, in its last annual report, posted sales of $446 million but losses of $137 million. Its principal product, the medium-size W30 multipurpose helicopter, has been a commercial flop.

Earlier this year, the Indian government hesitated to commit itself to a $95-million order for 21 of the aircraft for use in its offshore oil fields, and this brought on a financial crisis that led Westland management to look for rescuers. India recently indicated that it will go ahead with the purchase of the helicopters, but no contracts have been signed.

The choice of collaborating with other Europeans or with American companies in order to remain competitive--a decision faced frequently by high-technology Western European companies in recent years--always tends to generate political debate. But the zeal with which Heseltine has tried to head off the U.S. option is unusual.

The extent of his personal efforts and the cooperation by Western European helicopter manufacturers reflect the extent of European concern about U.S. dominance in key high-technology areas.

Heseltine is known to believe that a sizable American stake in Westland would jeopardize the competitiveness of all European helicopter manufacturers in a global market where sales are expected to total about $75 billion over the next 15 years.

Heseltine has long been known as a staunch “Europeanist” in defense cooperation. Earlier this year he helped to negotiate a Saudi Arabian order, estimated at $600 million, for the Anglo-Italian-West German Tornado multi-role combat aircraft, against stiff U.S. competition. And he has been an ardent supporter of other joint European ventures, including the European Fighter Aircraft project concluded this year by Britain, West Germany, Italy, Spain and France.

In addition to championing the European offer, which now seems to provide Westland with better terms than the American bid, Heseltine has reportedly sweetened it by dangling the prospect of a Ministry of Defense order for six additional Sea King helicopters worth $45 million if Westland decides in favor of Europe. Heseltine’s opponents contend that the Sea King order is little short of bribery.

Brittan and advocates of the United Technologies bid argue that it offers Westland greater long-term security because it would link it to the large U.S. domestic market and would make American technology available to it.

So far, Thatcher has remained aloof from the fight between her two ministers, insisting that the government’s role is not to make the decision but merely to ensure that Westland’s shareholders are free to make the best choice.