Kevin O'Toole/LONDON
LUCAS INDUSTRIES has agreed to pay $88 million to settle its long-running contract dispute over the supply of accessory gearboxes for US Navy McDonnell Douglas F-18s.
The group says that the Lucas Western Geared Systems operation in Utah, which was at the heart of the legal action, is now to be sold. Lucas says that the search for a "strong partner" has already begun.
Group chief executive George Simpson had earlier indicated that Lucas was prepared to fight the civil lawsuit despite heavy pressure from the USN, which included threats to bar the UK group from bidding for future US military contracts.
Simpson says that the protracted legal battle was having a "debilitating effect on the business" which Lucas was keen to end, however. He adds that the amount of the settlement is "out of all proportion" to the wrongdoings which centred on testing and procedural failings, rather than performance shortfalls in the gearboxes.
The problem were largely inherited by Lucas, when it purchased Western in 1987, as part of what has since proved, to be an expensive US acquisition spree.
Lucas has already paid one fine of $18.5 million over the gearbox issue, and the Utah plant ceased delivery for the best part of 1994 as the dispute dragged on.
The group says that it will now make a provision of £55 million ($85 million) to cover the latest settlement, and another £40 million to pay for restructuring at Western ahead of the proposed disposal.
Other parts of the group's US business have already been closed or sold, including the AUL business in California, which had also been the subject of legal action over testing irregularities on Azimuth drive units for the US Army's multiple-launch rocket system.
Simpson says that apart from the Western provisions, its annual results to the end of September are expected to be "in line with market expectations". They will be revealed on 9 October.
Source: Flight International