STEPHEN Henwood is an accountant. And it is through an accountant's eye for the bottom line that he is viewing his new role as the man in charge of BAE Systems' operations in Lancashire. After four months as Group Managing Director Programmes, Mr Henwood has until the end of March to map the future of BAE's plants in Samlesbury and Warton. Business editor ANDREW CALVERT meets the man with the purse strings. DECISIONS taken by Stephen Henwood will shape the future of the 10,000 people employed at BAE's two Lancashire plants.

They will also have a major impact on tens of thousands more engineering jobs in East Lancashire which remain reliant on the aerospace giant.

Even after spending the past four years at Tate & Lyle, his solutions will not come sugar-coated. He has the certainty and single-mindedness of a finance man when he gives a brief preview of the future:

Jobs in Lancashire -- there will be a "reduction in headcount"

Local suppliers -- they need to be more "competitive and responsive" against other sources of supply

Part-production overseas -- "I'd rather have 60 per cent of something than 100 per cent of nothing"

Technology -- "We will concentrate on technology that the customer wants, not technology for its own sake"

Mr Henwood, however, is not a revolutionary. What he promises is to improve efficiency and effectiveness, to increase the competitiveness of the organisation.

There is no doubt he is facing a challenge. Only last week BAE Systems announced a severe drop in pre-tax profits, down from £459million in 1999 to £179million in 2000.

The company revealed it had taken a £300million hit on the redevelopment of the Nimrod early warning flight, the final assembly of which takes place at Warton. Chief executive John Weston conceded that this year would be no better and warned shareholders they would have to wait until 2002 to see a rise in earnings. What makes the challenge even tougher is the past track record of the Lancashire-based military aircraft operations. In the 1990s, they effectively carried the rest of the group. Now, they are casting an envious eye at other parts of the group which now includes Marconi, a major stake-holding in the highly-successful Airbus, warships and submarines. It is a challenge he intends to face head-on and he has committed the next five years to restoring the fortunes of the Programmes business, of which Samlesbury and Warton are a major part.

"I have been away for four years and the market has changed, " said Mr Henwood, who was finance director of the former military aircraft division before moving to Tate & Lyle.

"We have moved from being a labour centric organisation to being one that is best on its intellectual capital. What we bring with everyone here at work is a huge amount of added value

"We have to change our business model to reflect that position. That is our challenge."

In July last year, BAE Systems announced 880 jobs would go from its Lancashire operations. Mr Henwood said more jobs would go this year and hoped they could be achieved through voluntary redundancy.

He pointed out that 500 additional engineers had been recruited last year and he hoped to attract the same number this year.

Mr Henwood believes strongly that BAE's future lies in high technology engineering. For Samlesbury and Warton, prospects are tied to the£16 billion Eurofighter.

The first production aircraft of the 232 ordered by the RAF is now being assembled in a hangar at Warton, redeveloped at a cost of £12 million -- "£7 million from the client, " he adds proudly.

But it is in the high tech hangar that you can see part of BAE's problems. Just one of the 12 assembly bays is occupied and it will be well into 2002 before full production is under way.

Despite having an advance order book that most bosses can only dream of, Mr Henwood knows he will have to be patient before the high margin profits return. Export markets for the Eurofighter are a top priority. Greece had "initialled" a deal for 80 planes and negotiations were under way with Australia, Norway, Korea and the Netherlands.

Another key landmark will come later this year when the US and British Government decide on the next generation of fighter aircraft. BAE is part of a consortium headed by Lockhead Martin which is competing with Boeing to secure the Joint Strike Fighter project.

At stake is a $90 billion dollar prize -- with BAE looking to pick up a 30 per cent share of the work and the profits.

But yet again, those are earnings way into the future. Over the short term, the accountant's mantra of controlling costs and improving competitiveness will dominate boardroom discussions.

"We are a very capable organisation," added Mr Henwood. " Fundamentally, this is a fantastic business, but we have to pass the customer test. If our capability is too expensive for our customers, that tells us something."