BAE, Europe's biggest defense contractor, will review the future of its Land Systems unit in light of the government decision, Mike Sweeney, a spokesman for the London-based company, said yesterday.

"If the government wants an indigenous armored-vehicle capability in the UK they need to buy something soon from BAE," said Nick Cunningham, a defense and aerospace analyst at Evolution Securities in London. "Otherwise BAE will have to restructure and scale back its manufacturing business, which could even include selling it or closing it down."

The UK defense ministry scrapped an order for as many as 2,000 armored utility vehicles on Dec 11 as it diverted spending to the war in Afghanistan. BAE had been counting on being awarded the contract to sustain manufacturing at the Land Systems unit, the country's only maker of so-called main battle tanks.

Britain introduced the world's first tank at the Battle of the Somme and its most recent, the Challenger 2, was built by BAE until 2002 and is in service in Iraq.

"We will clearly have to consider what this means for the size and shape of the Land Systems business in the near future," BAE spokesman Mike Sweeney said yesterday by telephone. The company said it can't rule out UK plant closures and job cuts.

Ministry of Defence spokesman Al Green said he couldn't immediately comment.

Job cutss

Land Systems UK, which employs 2,000 people at 10 main plants, had been the frontrunner to win a contract to build a version of General Dynamics Corp's Piranha V, which had been selected to fulfill the utility-vehicle role in the Ministry of Defence's Future Rapid Effects System program.

Following last week's decision to cancel the Piranha in spending cuts that also postponed the purchase of two aircraft carriers and scaled back a helicopter order, the MOD said it will refocus the FRES program on Scout tracked vehicles.

While BAE is bidding to build the Scout, the vehicle won't enter service until 2013 at the earliest.

Land Systems said last month it would cut as many as 200 jobs as earlier delays to Britain's purchase of fighting vehicles left the unit reliant on a handful of models.

Production work has dwindled to a handful of soon-to-be-completed models, including the Pinzgauer all-terrain wheeled vehicle and Terrier general support engineer vehicle, plus an unspecified project for a Middle Eastern client.

In the absence of new orders, that will leave only upgrade and integration work on models such as the AS90 self-propelled howitzer, FV430 armored personnel carrier, Titan bridge-laying vehicle and Panther command-and-liaison vehicle, plus a possible new turret for the Warrior tracked vehicle.

BAE spokesman Sweeney said that with the Piranha order canceled and the bulk of value in modern military vehicles coming from mission systems and subsystems such as electronics, weapons and armor, the company will inevitably shift focus away from new production if orders aren't forthcoming.

"We are already seeing an increased emphasis on systems integration as military vehicles become more complex and this is likely to continue," he said.