British Aerospace wants Europe's defence companies to consolidate and then forge links with US groups, avoiding the creation of rival transatlantic industries, BAe's chief executive says.

"I believe that in 10 or 15 years, there will only be two or three major international groups. British Aerospace will be part of one of them," BAe Chief Executive John Weston told Le Monde.

"But this means we need to weave strong transatlantic ties and not set European groups up as rivals to big American companies likeBoeing and Lockheed Martin."

He does not believe transatlantic deals would be struck in the near future because of the Pentagon's reluctance to confide arms programmes to international groups.

BAe is watching to see whether US authorities would allow a European firm to buy Northrop Grumman after opposing a planned merger between Northrop and Lockheed Martin, he says. In any case, Europe's fragmented industry needs to consolidate first to negotiate from a position of strength.

Weston laments the slow pace of the process, but says some progress has been achieved, notably an agreement in principle outlined in March to consolidate Europe's aerospace industry around the Airbus consortium.

But he says the way the Europeans were planning to go about it - by creating sub-divisions around various sectors, such as missiles, satellites and helicopters, in a series of operations - was inefficient and costly.

"I would prefer a giant merger, that is to say, combining the activities of the principal European defence and aerospace groups,'' Weston says.

He also repeats that he does not want the French government, through its huge holding in Aerospatiale, or German car maker Daimler-Benz, through its aerospace business Dasa, to hold significant stakes in the new European mega-group dubbed Euro Co.

"Otherwise our current shareholders would never agree to exchange their British Aerospace shares for stock in Euro Co,'' he says.

However, given the progress to date, a merger between BAe and General Electric (GE) looks less likely, he says. Such a merger has been raised as a possible alternative.  

"There are obvious synergies between the two groups.

"That's why some members of the British government think it would be a good idea. Others worry about the risk to competition posed by such a merger.

"My view is that given the progress achieved in the European negotiations, the likelihood of a deal with GEC is quite slim today,"

Weston adds.

Source: Flight Daily News