Armor Holdings, the American company bought by BAE Systems for $4 billion two months ago, has covered its purchase price after unexpectedly winning an order to build 10,000 lorries for the US Army.

The company has been named sole supplier to build a range of cargo and troop transport trucks in a programme worth $3.5 billion. The US Army’s Family of Medium Tactical Vehicles (FMTV) contract was to be contested by several companies, but instead has been given to Armor.

Armor, based near Houston, Texas, has also won a $500 million contract to build Mine Resistant Ambush Protected (MRAP) vehicles since the BAE acquisition in July.

The two contracts mean that BAE, Europe’s largest defence company, has effectively covered Armor’s $4 billion purchase price already. BAE also assumed $500 million of Armor debt as part of the acquisition.

The FMTV and MRAP programmes are a direct response to the threat of roadside bombs in Iraq and Afghanistan as transport lorries require heavier armour protection.

Linda Hudson, president of BAE’s land and armaments division, said: “What Iraq has shown is that there are no safe places on the battlefield any more and countries are looking to upgrade protection for all vehicles.”

The US military’s MRAP programme is expected to be worth over $7 billion and BAE and Armor have collectively won about $1 billion in contracts so far.

Ms Hudson believes that the company could win a “couple of billion more . . . It is our belief that demand for these vehicles will remain strong in the US this year and next year, driven by Iraq.”

As Britain and the United States begin to withdraw troops from Iraq, the need for thousands of new armoured vehicles is likely to drop.

However, other countries are expected to learn from the Iraq experience and will begin to upgrade their own military vehicles. BAE estimates that the market for replacing and upgrading military vehicles is worth $20 billion a year for at least the next five years.

The company plans to use its manufacturing bases in America, Britain, Sweden and South Africa to win international contracts.

BAE was promoting its strengthened land systems division at the start of the Defence Systems and Equipment International (DSEi) exhibition in London yesterday.

The biennial arms fair showcases military hardware from companies around the world.

The start of the event was marked by protests by antiarms industry campaigners, who complained about the presence of delegations from China, Libya and Saudi Arabia.

Mark Thomas, the comedian, said: “The multitude of arms dealers gathered from around the world to flog guns, bombs and the other wherewithal to take human life while Londoners pay a £4 million police bill to protect the arms dealers from peace protesters makes DSEi unacceptable and unwelcome.”

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