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Home | Update | LATEST ISSUE | Gallery | FR Profile | Datafiles | FR 6/98 EUROPEAN MERGER IDEAS AIRED BY MANUFACTURERS by Norbert Burgner "This industry will be either European or irrelevant." With these words, the German government's Aerospace Co-ordinator, Dr. Lammert, had called for the restructuring of Europe's aerospace industry (LRI) already two years ago. At the end of March of this year, the four Airbus partners Great Britain, Germany France and Spain produced a report on the restructuring of the LRI and the Defence Industry connected with it. In a confidential paper, (the contents of which are known to FLUG REVUE), the partners stress that the planned structure will not be a revamping of Airbus Industrie, but a fully integrated European Aerospace and Defence Company (EADC). According to Aérospatiale, Daimler-Benz Aerospace, British Aerospace and the Spanish Casa, a "headquarters" with centralized financial, managerial, strategic and planning responsibilities will be at the helm of the enterprise. The current plan envisages the following core business areas: military aircraft, Airbus, guided weapons, spaceflight, helicopters, as well as, civil and defence systems. Civil aircraft maintenance, airport systems, rocket propulsions, weapon heads and (to accommodate the wish of future partner Dasssault) general aviation, are seen as non-core business areas. No agreement has been reached on regional planes, satellites and strategic intercontinental weapons. The listed "core business units" remain economically independent and keep would their assets. The respective board of directors report to the "Headquarters". "National coordination hubs will mediate between governments and the companiesÕ managements, for example in questions of national safety. The industrial partners have recognised that the best way to achieve the intended level of integration, is to go for a complete fusion in a one-step approach. A gradual integration, based on an EADC holding plan, in which completed subsidiary structures would be added from time to time, was turned down, as was the "Airbus-Plus-Solution", in which all further business areas would join the integrated Airbus Industrie. According to everyone involved the advantages of the favoured one-step fusion, despite its apparent complexity, are its relative simplicity, and most of all its speed. One would have instant access to key synergies, i.e. consolidation (rationalisation, technological, industrial and economic effects). The polarisation would furthermore strengthen the position and be attractive to other partners and investors. This is as far as unity goes. Bearing in mind the concentration of power at Boeing, British Aerospace and the German Dasa are aware of the urgency of bringing about the integration process and are in favour of acting quickly in changing AI into a capital firm. The French partner A_rospatiale, however, declines this single solution" because they feel that it would only lead to further fragmentation of the European industry. Are these delaying tactics used in order to push through their own position later when time pressure is increasing even more? Nevertheless, opinions differ regarding what an economic organisational framework of EADC should look like once the process is completed. Private owned companies, such as Dasa and British Aerospace, want the new company to be run privately too, and Casa, which is slowly coming round to working on the same lines, holds the same view. However, Aérospatiale, which is 99 per cent state-owned, insists on the status quo and wants to continue to be nationally controlled. The most important task for all involved is to undo this "Gordian knot within the next few months. It must not take longer. Looking at the wave of mergers in the USA, it is apparent that there is precious little time. However, it is also obvious, that industrial and economic structures, which have grown over decades, cannot follow a new Ultima ratio over night. The guidelines are in place and all that is left to do is to put them into practise. In doing so people must overcome their limiting perceptions. This cannot be easy considering EuropeÕs historical background. Those given to gloominess and pessimism should recall Lammert's words: "We should not be looking for reasons to fail but, to show unveil new ways leading to success." From page 4 of FLUG REVUE 6/98 Home | Update | LATEST ISSUE | Gallery | FR Profile | Datafiles | FR 6/98 Copyright 1998 by Motor-Presse Stuttgart. All rights reserved. Last updated May 7, 1998 FLUG REVUE, Ubierstr. 83, 53173 Bonn, Germany