The Defence Secretary, Heseltine, favoured a European solution, integrating Westland with a consortium including British Aerospace (BAe), Italian (Agusta) and French companies.
Thatcher and Trade and Industry Secretary Leon Brittan, while ostensibly maintaining a neutral stance, wanted to see Westland merge with Sikorsky, an American company.
By June, Bristow was threatening to end his bid unless the Government assured him that there would be future orders for the company from the Ministry of Defence and that the repayment of over £40 million of launch aid for Westland's newest helicopter from the Department of Trade and Industry was waived.
[2] It was decided that Tebbit should persuade the Bank of England to co-operate with the main creditors in the hope that a recovery plan and new management would end the threat of receivership.
Heseltine came out against this plan after realising that Westland would probably become responsible for assembling the Sikorsky UH-60 Black Hawk, which the Ministry of Defence would then be under great pressure to buy.
The Government was officially neutral (i.e. arguing that it was a matter for Westland directors and shareholders) but by November Heseltine was lobbying hard for the European option.
Brittan argued that the NADs' opposition should be set aside, but Howe and Tebbit were not unsympathetic to Heseltine's proposed consortium, and the decision was deferred to the Cabinet Economic Affairs Committee (E(A)) on Monday 9 December 1985.
Thatcher, who complained that three hours had been spent discussing a company with a market capitalisation of only £30m (a tiny amount in government terms), allowed Heseltine until 4 pm on Friday 13 December to submit a viable proposal for a European deal.
[6] Over Christmas, Thatcher discussed with close colleagues the option of sacking Heseltine, as Brittan had urged her to do (Chief Whip John Wakeham cautioned against), but—as she later admitted in her memoirs[7]—she shrank from doing so as he was too popular and weighty a political figure.
Cuckney wrote to Thatcher, at her behest, asking for reassurance that the Sikorsky deal would not damage Westland's business prospects in Europe.
Heseltine supplied extra material about the risk of losing European business, which Thatcher did not include in her reply to Cuckney.
[9] Thatcher replied to Cuckney to the effect that the British Government would continue to support Westland in gaining orders in Europe.
Contradicting Thatcher's reassurances to Cuckney, Heseltine claimed that the Sikorsky deal would be "incompatible with participation" in European helicopter projects.
This was a blatant challenge to Thatcher's authority as Heseltine had not consulted Downing Street, the Department of Trade and Industry or Mayhew before writing to Horne.
Mayhew's letter of rebuke to Heseltine—marked "Confidential"—reached Heseltine at lunchtime on Monday 6 January and was immediately and selectively leaked to the Press Association by Colette Bowe, chief information officer at the Department of Trade and Industry, at Brittan's request.
The Attorney-General, Sir Michael Havers, took a stern view of leaks, especially of confidential legal advice, and threatened to resign if an official inquiry was not set up to look into it.
Heseltine had won the moral high ground over the leaking saga, but Lawson recorded that he seemed obsessive at Cabinet and attracted little sympathy.
[11][12] Although eyewitness accounts differ as to the exact details, Peter Jenkins claims that Heseltine lost his cool and proclaimed "I can no longer be a member of this Cabinet".
The Prime Minister's office then requested Malcolm Rifkind to take up Younger's previous job, Secretary of State for Scotland, which he accepted.
In his resignation statement in the House of Commons Heseltine accused Brittan of pressuring Sir Raymond Lygo, CEO of British Aerospace, to withdraw from the European Consortium.
Sir Robert Armstrong, the Cabinet Secretary, held an inquiry into the leaking of Mayhew's letter and reported his findings to the Prime Minister on 21 January.
"[18] Havers, who demanded the inquiry, later claimed: "Unless the PM is the most marvellous actress I've ever seen in my life she was as shocked as anybody that in fact it was on Leon Brittan's instructions.
"[25][16] Heseltine was frustrated at Kinnock's failure to exploit the moment and claimed that Thatcher's statement brought "the politics of the matter to an end" and that he would support the Government in the lobby.