May 31, 2007 / 1:47 PM / 13 years ago

BAE in talks with M'bishi Heavy on Typhoon

(Adds details, byline)

By Aiko Hayashi

TOKYO, May 31 (Reuters) - BAE Systems Plc BA.L is in talks with Mitsubishi Heavy Industries (7011.T) about a licensing deal for the Eurofighter Typhoon if Japan chooses to buy the plane, an executive of Europe’s top military contractor said on Thursday.

Mitsubishi Heavy Industries (MHI) makes F-15J fighters under a license agreement with Boeing Co. (BA.N), Patriot missiles with Raytheon Co. (RTN.N) and vertical launching systems with Lockheed Martin Corp. (LMT.N), but it has no big projects with BAE.

“At the moment our main discussion is with MHI, and they have demonstrably the most significant fighter aircraft capability of the Japanese industry team,” Nigel Whitehead, group managing director at BAE, told Reuters in an interview.

“But the relationship will not necessarily be limited to MHI.”

Whitehead said MHI officials visited its U.K. plant last month to see the manufacturing process for the Typhoon. Any BAE deal with MHI would be contingent on the Japanese government deciding to purchase the plane.

Japan has been a tough market for non-U.S. contractors such as BAE because U.S.-based rivals like Boeing Co. (BA.N) and Lockheed Martin (LMT.N) have a strong grip on the market, reflecting close military ties between the two countries. Japan and the U.S. have agreed to step up cooperation between their armed forces in the face of rising regional tensions sparked by North Korea’s nuclear and missile tests.

But Japan’s defence ministry said earlier this year that it would consider buying the Typhoon as it plans to start replacing its fleet of 60 F-4 fighters and training aircraft in the next couple of years.

BAE’s chances might also be helped by the U.S. Congress’ decision to ban exports of its most advanced and most expensive fighter jet, the F-22A Raptor, built by Lockheed Martin and Boeing. The move could prompt Japan to take a closer look at the Typhoon.

Whitehead said he expected Japan’s defence ministry to ask BAE to submit a proposal this fall, which the government would then evaluate. It was unclear how long it would take for Japan to make a decision, he said.

Whitehead said BAE and its three partners for the Typhoon — Germany, Italy and Spain — would welcome Japan as the fifth member to its consortium if it chose to make an exemption to a self-imposed ban on participating in such international projects.

Japan is the only country that forbids the export of arms, a rule rooted in a pacifist constitution following its defeat in World War Two. The ban has meant it could not work on most overseas weapons projects, although exemptions have been made.

“I understand there are restrictions,” Whitehead said.

((Reporting by Aiko Hayashi, editing by Erica Billingham; Reuters Messaging: aiko.hayashi.reuters.com@reuters.net; +81-5473-3714; aiko.hayashi@reuters.com)) Keywords: BAESYSTEMS/

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