* Says not been awarded follow on production contract
* Shares down 4 percent
LONDON, Aug 27 (Reuters) - British defence giant BAE Systems (BAES.L) has failed to win a follow-on contract for the production of vehicles for the U.S. Department of Defense, sending its shares down nearly 4 percent.
The company, which generates more than half its $34 billion sales from the U.S., said the contract with the Family of Medium Tactical Vehicles (FMTV) programme was expected to generate $2 billion in both 2009 and 2010.
It said it had planned for the contract to deliver less than $1 billion annual sales thereafter, but could not yet calculate the full implications of the loss.
BAE shares were down 4 percent by 1426 GMT, valuing the business at 11.8 billion pounds.
Reporting by John Bowker, Editing by Ben Deighton