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EUROPEAN MERGER MANIA CONTINUES

The restructuring process of the European aerospace industry is in full gear: On 14 April, Finmeccanica and EADS, the European Aeronautic Defence and Space company, announced in Rome that the two are planning to set-up a joint company in 2000. With this announcement, a close competition for the favour of the Italian concern is coming to an end for now.

The new company will be a 50:50 partnership between EADS and Finmeccanica. The partners Dasa, CASA and the Finmeccanica subsidiary Alenia Aeronautica are joining there activities in the field of military and civil aircraft manufacture. The company will have an annual turnover of approximately Euro 2,5billion and will employ a workforce of 17000 people. The most important aircraft programs of the new company, which will operate as an EADS subsidiary, include the Eurofighter, ATR, Tornado and the Airbus Military A400M. In the ranking of the largest manufacturers of military aircraft the new joint-venture will be on second place in Europe behind BAE Systems and will be on fourth place in the worldwide comparison behind Boeing, Lockheed Martin and BAE Systems.

The managers of Finmeccanica choose the best of the available options. BAE Systems, for example, would not have allowed the Italian company to keep its independence. As a result, Finmeccanica is now connected with various industrial partners in Europe: In the area of defence electronics, it is cooperating with BAE Systems, in the helicopter business it is working together with GKN Westland via Agusta and with EADS the Italians have joint in aircraft manufacture. Furthermore, in co-operating with Boeing, Finmeccanica has a connection across the Atlantic.

The EADS offer was more attractive than the one from BAE. The perspective of joining in the profitable Airbus business is very tempting to Finmeccanica. EADS would like to have the Italians on board the Airbus consortium and has offered Finmeccanica to acquire five percent of the then privatized Airbus company over the next three years. This announcement was not very well received at BAE Systems. The comment from the BAE headquarters in London was accordingly cool: "This five percent offer can not be made without our agreement." Furthermore, EADS has offered Finmeccanica a ten-percent share of the A3XX program.

With this new joint-venture, the restructuring process is becoming more exciting than ever. At the signing of the contract in Rome, the two Partners were very restrained in order not to offend BAE Systems. Europe's aerospace industry is too much connected to allow a milestone on the way to an integrated industry be celebrated as the final achievement. The branch's consolidation is not yet finished. Everybody in the industry knows that.

Also, the partners need each other. The various companies are working closely together. Breaking pieces on one side might effect oneself in return. The European network of the aerospace industry is becoming closer and tighter. In the long-term, EADS and BAE Systems will not be able to avoid a closer alliance, even though there are several questions unanswered today. From this point of view, there are only winners. Even BAE Systems, after the announcement of the joint-venture between EADS and Finmeccanica, announced that a co-operation with the Italians would have been nice, but will not be vital for BAE. Manfred Bischoff stated in Rome: "We do not wish to build a castle." At the same time he set a new strategic course which leads across the Atlantic, saying that in order to succeed in the US market, the Europeans must find partners in the USA.

From page 4 of FLUG REVUE 6/2000