ONE of the jewels in the crown of the British defence industry could soon pass into US hands.

Vickers, a Tyneside institution dating back to 1847, is on the verge of becoming part of US defence group General Dynamics after it launched a £309m takeover bid.

The company, based in Delaware, is keen to get its hands on Alvis Vickers to help it "strategically expand" its European armoured vehicle business.

Vickers, the builder of the Challenger tank, became part of the Alvis group when it was bought for £16m in September 2002.

Alvis employs about 2,800 people, including 1,100 at Newcastle, Telford, Leeds and Wolverhampton, in making vehicles ranging from battle tanks to armoured personnel carriers.

The company, based in London, said it believed it would benefit by being part of a leading international defence group with complementary activities.

The two companies did not say how the proposed deal would affect jobs and sites at Alvis.

But General Dynamics, which is involved in arms, shipbuilding and marine systems, and aerospace manufacturing, said it intended to build on the UK company's strengths.

The company said it viewed the management and employees of Alvis as an important resource that had been critical to the success of the group.

"The existing employment rights, including pension rights, of all employees of the Alvis Group will be fully safeguarded," it said.

General Dynamics also makes technology used in defence information systems, land and expeditionary combat vehicles, armaments and munitions. The group employs about 67,000 people.

It said Alvis would give it a platform for further growth in the UK and Scandinavian countries.

Staff and unions have made it clear they will fight to keep military manufacturing on Tyneside.

The Vickers company was founded by WG Armstrong, later Lord Armstrong, as an engineering works to build his inventions in the field of hydraulic engineering.

A few years later, the Government invited him to improve the Army's artillery, the design of which had remained unchanged since the Middle Ages. Armstrong's factories responded by turning out guns of all types, ranging from .303-calibre rifles to 110-ton naval guns.

The work of Vickers was seen as a complement to Alvis, which makes tanks, armoured infantry fighting vehicles, armoured personnel carriers and light armoured vehicles.

The Alvis Group grew substantially last September when it acquired the Tyneside company which supplies the Challenger 2 battle tank, the Trojan Engineer and Titan Bridgelayer vehicles.

The deal also gave it a military bridging equipment business and South Africa's primary armoured vehicle supplier.

Aerospace group BAE Systems, based in Farnborough, bought a 29 per cent stake in Alvis from Midlands engineering group GKN in August last year.

In its results for the year to December 31, also announced yesterday, Alvis said pre-tax profits before one-off items and goodwill rose 20 per cent to £19.8m on a 54.5 per cent rise in turnover to £348.8m. Pre-tax profits increased by 40 per cent to £20.3m.

The group's order book rose 14.2 per cent to £892.6m.