THERE CAN BE FEW THINGS in business so difficult as the rationalisation and consolidation of an industry which does not want it - regardless of how badly it is needed. It is worse still, if the Government which owns the industry needs that reconstruction even more desperately than the companies which it is trying to rationalise. The French Government has a difficult task in reconstructing its aviation industry, therefore, mainly because it seems to have lost (or not found) the rationale for doing so.
European Governments have tried to reconstruct industries before - memorably in the case of the UK Labour Government which tackled the task in three difficult industries (aircraft, shipbuilding and motor vehicles) at once. As the UK experience proved, merely assembling several companies under one corporate hat is not a reconstruction. The real pain in the building of British Aerospace came not from the headline-grabbing nationalisation of private assets nor from the selection of a corporate logo. The real problem lay in trying to merge the hitherto-scattered, competing, operations into one. The nationalisation took a matter of months; rationalisation has taken 20 years.
The French Government would be wise to learn that lesson. True, it is not having to tackle nationalisation of an entire industry as the UK did. Having previously nationalised most of the French industry, the Government is now seeking to reconstruct it as a way of ridding itself of the burden. It probably sees a great attraction in having a single, powerful, French aerospace combine - but it probably sees far more attraction in stemming the flow of money out through the state-owned industry.
In its desire to rid itself of state-owned loss-makers, the Government is avoiding the issue that the two components of this merged industry - Dassault and Aerospatiale - complement, rather than compete with, each other. Dassault builds military aircraft and corporate jets; Aerospatiale builds (mainly in joint ventures) large and small airliners, helicopters, weapons and light aircraft. All they each have are a headquarters and excess factory space. Merging their headquarters functions might save several hundred jobs. Merging the two manufacturing operations would make no difference to factory space surplus
Unlike the old British Aircraft Corporation and Hawker Siddeley, Dassault and Aerospatiale have no competing programmes to cut. A combined Dassault and Aerospatiale will be bigger than the separate companies, but it will have access to few, if any, economies of scale
This merger will not nationalise two competing airliner programmes, or two fighter programmes, nor make the French industry more competitive. That, it seems, would be left to the new company to sort out - which it could only do by arranging further mergers and joint ventures.
Ironically, the French Government is struggling with another reconstruction - that of aero-engine maker Snecma - largely because of the sort of alliances which should guarantee that company critical mass. Snecma has been told to dispose of some subsidiaries to concentrate on its core activities, and its just-departed chairman was fighting to establish new alliances to expand its business base. Seemingly, however, the Government wants the company to concentrate on its strong links with General Electric, but does not want to contribute to new programmes which would safeguard those links.
Nobody would envy the French Government its current task. It needs to extract itself from the legacy of state ownership of a vital manufacturing industry while remaining stuck to the dogma of preserving a uniquely French aerospace industry. What it must realise is that those two aims are incompatible. French industry can only become internationally competitive by ceasing to be French: it can only be rationalised if its rationalisation is included with that of the rest of the European industry.o
"French industry can only become internationally competitive by ceasing to be French."
Source: Flight International