Julian Moxon/PARIS Kevin O'Toole/London

French prime minister Lionel Jospin has formally announced that the privatisation of defence-electronics giant Thomson-CSF, begun by the previous right-wing government, is to be halted, but has hinted that a sale may still go ahead provided that the state retains a decisive controlling interest in the business.

Financial markets were thrown into confusion by conflicting signals over the likelihood of a sale.

"It's extremely difficult to read because the door is never quite closed on a sale, and there could be another change of direction at any time," says Chris Avery, aerospace analyst at Banque Paribas.

Jospin's initial statement, made after stock markets had closed on 11 July ahead of the bank-holiday weekend, apparently ruled out a full privatisation, saying it "-was not in the interest of the state, the company and its employees".

He gave no specifics, however, adding only that that an "industrial solution" would be defined over the "next few weeks" designed to create a strong French business and defence-electronics operation with a "decisive state holding".

This still leaves the possibility that the Government could dilute its 58%holding in the group while retaining a veto through a "golden share". Such speculation seemed to be confirmed by remarks from French finance minister Dominique Strauss-Kahn on 16 July that the state could be prepared to let its stake fall to 33% to make room for investment by an alliance partner.

Aerospatiale, the privatisation of which is also on hold, is keen to revive its bid to see Thomson-CSF merged with its own satellites and missiles operations. Aerospatiale had been pursuing such plans in concert with the Alcatel and Dassault bidding team, but had been forced to withdraw by the previous French Government.

A further complication is the wide-ranging review of the country's defence industry being carried out by the new Government. Parliamentary defence commission president Paul Quilès makes it clear that "nothing can be decided" before the final version of the review emerges in mid-September.

In an unprecedented move, the defence commission invited the presidents of other European aerospace companies to present their views on ways in which the industry could be restructured.

John Weston, chairman of British Aerospace Defence, has argued for a "total consolidation" of Aerospatiale, Dassault Aviation, Daimler-Benz Aerospace (Dasa) and his own UK group as a "strict minimum" around which other European industries might consolidate.

Thomson-CSF chairman Marcel Roulet had warned in his evidence to the French parliament that the group risked becoming outmanoeuvred in Europe by the UK's privately owned defence businesses such as GEC.

The Thomson-CSF debate in France came on 11 July as GEC announced a tie-up with Italian defence group Alenia. On the same day, UK trade secretary Margaret Beckett cleared the way for GEC to make a full bid for the Siemens defence-electronics unit, which had been complicated by the German group's ownership of the former Plessey radar, defence and air-trafÌc-control business.

In 1989, the UK competition authorities had forced GEC to split the Plessey acquisition with Siemens and made the group give undertakings that it would not in future make bids for the remaining parts of the business.

Source: Flight International