Aerospace |
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Europe's
Defense Industry Anxious To Adapt Quickly Speakers agreed that the triple whammy of shrinking defense budgets, a rapidly consolidating U.S. industry, and the traditional desire to protect individual country's industries presented a difficult, but necessarily surmountable obstacle. In the last ten years, the European defense industry has been reduced by half, now employing somewhere around 600,000. Multi-national deals have been struck, but not easily. Witness Eurofighter. Witness Matra-Bae Dynamics. Witness the failed attempt of GEC to get involved in the Thomson-CSF privatization bidding. During the same ten years, U.S. defense companies have been subject to the same economic pressures. The burden of peace and a suddenly dormant commercial aerospace industry caused many famous U.S. aerospace names to cease to exist on their own. For many years, the California commercial real estate landscape looked like a billboard farm, dotted with "Space Available" signs, as companies downsized, sold out or just went out. It is perhaps generous to credit U.S. companies with the foresight to consolidate. It is more realistic to attribute their moves to survival instinct. Still, the lean years for the U.S. aerospace industry are somewhat passed, and with a revived commercial aircraft market, are even considered distant memories in some circles. Several new, strong competitors stand in the place of an older, fragmented industry. By the fall of this year, four dominant U.S. firms will stand where several dozen predecessors once stood. Three of the four - Lockheed Martin, the McMerged Boeing/McDonnell Douglas and Raytheon Hughes -- will divvy up almost equal shares; the fourth - Northrop Grumman will take a smaller, but still significant chunk of the bounty. European companies will come to grips with the same market realities. To reach this goal, however, will require companies and countries to commit to short term sacrifice, in favor of long term strength. At issue, however, is France. While the new Socialist government slowly works through the issues of privatization versus nationalization, companies in other European countries will feel hamstrung. French companies are key players in several consortia, including Airbus Industrie. Airbus partners have agreed that they need to evolve the organization into a more formal corporate structure, and away from the consortium within which they have operated. Three of the four partners seem to agree that putting assets into the corporation is the correct way to accomplish this goal. Aerospatiale remains resistant. The French aerospace company may become even more so in light of the new government's commitment to preserve jobs. Aerospatiale and Dassault were being forced into a shotgun marriage by the former center-right government. Now, new French Defense Minister Alain Richard is not so sure. The engagement may still be on, but the wedding date is being suspended, a result of his assertion that the matter is now not so urgent. Richard may not be so reticent as he seems, however. In statements last week, he exclaimed that Aerospatiale and Dassault would probably need to be part of a much larger corporation in order to compete effectively. The key, he said, is to properly negotiate with all involved parties. Perhaps so, but the quicker European defense interests
become strong, the quicker they will stay competitive. In light
of news at the Paris Air Show two weeks ago revealing that
France had lost its number three rating as an military aerospace
supplier, "the quicker" may well be the better.
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