Julian Moxon/PARIS Kevin O'Toole/LONDON
It would have been unrealistic to hope for too much from the meeting of Europe's defence ministers, hosted last week in Paris. In the end, there were some further encouraging noises over Europe's defence consolidation, but little to address the issues which have made its progress so painstakingly slow.
Perhaps most hopeful was the promise by the politicians to bring together their defence policies - something of a precondition for the industrialists to get moving on some more meaningful restructuring. Host French defence minister Alain Richard and the ministers of Germany, Italy, Spain and the UK joined in outlining a June deadline to draw up new targets on harmonisation in such areas as procurement and research.
They also expressed the usual praise for the "considerable progress" made in rationalising their national aerospace/defence industries and faith in their futures.
Yet - perhaps more revealing - many questions were left unanswered. Not least is that of state ownership, arguably the biggest block faced by the industry as it attempts to patch together cross-border mergers. The politics of giving up national champions in pursuit of European giants is another. Both questions have yet to be answered fully by the ministers' French hosts.
The recent spate of activity in defence electronics and space is a case in point. A large part of the French restructuring has been put into place, with the new grouping being built around Thomson-CSF. The final plan, unveiled just over a fortnight ago, will go some way towards privatisation as the French Government's holding slips from 58%to only 43%. Alcatel nominally takes the lead with its 16%, with Dassault Industrie and Aerospatiale rewarded with smaller stakes for having pooled businesses (defence electronics and satellites, respectively)into the new grouping, still with Richard's "decisive" state holding.
France has been quick to position this long delayed piece of French consolidation as a potential focus for wider European consolidation. There is a question mark, however, over just how attractive prospective partners may find this aggressively French grouping.
Thomson-CSF has made little attempt to hide the fact that it sees GEC-Marconi as its most "natural" partner. While there are other smaller alliances that it hopes to seal, including a promise to rein in its patchwork of joint ventures, the main prize would be to tie in with Europe's other defence systems giant. That would create a group comparable to the $10-15 billion defence electronics sales boasted by the likes of Lockheed Martin.
Yet GEC clearly has its own agenda to follow and may now be less in need of a big European tie-up than Thomson-CSF. GEC has already sealed an Italian deal with Alenia Difesa/Finmeccanica in defence electronics and separately on communications.
That has been followed by the long-promised North American acquisition, in the shape of Tracor. GEC counters suspicion that the deal was carried out "in frustration or reaction" to the delays in Europe. Rather, it is about making GEC-Marconi a more effective competitor for US Department of Defense business. Even so, the acquisition shows that the group's interest lies as much across the Atlantic as the English Channel.
GEC-Marconi's North American arm will now count sales of $2.3 billion. The group makes no secret of its willingness to snap up further US acquisitions, perhaps from the fall-out of the Northrop Grumman/Lockheed Martin merger.
France's privately owned Lagardère group has also been busy building up a rival European coalition around its Matra business. British Aerospace and Daimler-Benz Aerospace (Dasa)have shown willing, both throwing in their missiles units to create the largest grouping in Europe, at some $5 billion.
That makes for some interesting strategy ahead for the French Government's new champion. The Government may have won the tussle with its weapons procurement executive over the need for only a single missiles grouping. In practice, however, it is still faced by three French players - Aerospatiale, Matra and Thomson-CSF.
Equally, the new Alcatel/Aerospatiale/Thomson-CSF satellites grouping is challenged by Lagardère's Matra- Marconi Space venture with GEC.
Lagardère shrugs off suggestions that it might be obliged to play the game in France, talking instead of pursuing its "independent strategy" and the fact that it is already on course to become "the world leader in space and missiles". Saab and Alenia would appear to be more important targets in the fiight to increase market share.
Such splits could easily spread as Europe faces the heavyweight battle to forge links on combat aircraft. At the end of last year France managed to persuade Germany and the UK to join in calling for the formation of a grand single European aerospace company, thus keeping alive the prospect of a re-formed Airbus Industrie becoming the centre of a grand defence coalition.
BAe and Dasa and their respective governments have signed up in theory, but let it be known that it will remain theory while there is a risk of a large French state holding in any new body via Aerospatiale.
The French Government has recently tried to strengthen its hand by pushing forwards the long-awaited merger between Aerospatiale and Dassault Aviation, but more than two years of delays have probably undermined any strategic effect it could have had on restructuring.
Perhaps more significant is Richard's acknowledgement that Dassault's combat aircraft arm is moving ever closer to that of BAe. Initially, only a joint venture based on research into future technologies is planned, but there is little doubt that a deal will eventually be forged under which the rival Eurofighter and Rafale combat aircraft will be marketed in non-conflicting areas of the globe. This could, in turn, lead to a wider military grouping including Dasa.
Source: Flight International
