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EUROPEAN MERGER MAZE

If Dasa and British Aerospace go ahead with a merger, and France stays out, the French have to blame none other than themselves. For months they chose to ignore the threatening voices of their German and British friends, and now they got the check for it.

France did not do its homework correctly concerning the elimination of state-controlled industry structures, and now has to work late. Some highly studious people have always seen this coming, haven't they.

At the time of the copy deadline of this edition, it still was not clear what is going to happen.

France claims to have tried without any doubt and very clearly to make up for what was neglected (for years) according to the views of the members of free economy. The mergers of Thomson-CSF/Alcatel/Dassault Electronique/Aérospatiale as well as Aérospatiale/Matra Hautes Technologies were to be adequate pieces of evidence.

From a political perspective this may be true, but for the industrial part, it is not sufficient. Seen from a commercial viewpoint, the state cannot be shareholder and customer at the same time.

Therefore, to create the core of a future consolidated European aerospace industry, Dasa and BAe want to make the first step. When time is right, France is to join them in some kind of second step of integration.

Consequently, DaimlerChrysler Aerospace, with a turnover of 15,3 billion marks for 1997, and British Aerospace, with a turnover of 25 billion Marks, are to amalgamate to the largest European aerospace company. BAe will get around 60 to 65 percent of the shares of this first step towards the European Aerospace and Defence Company EADC, while Dasa is to receive the rest. But the first doubters already make themselves audible.

Because of the widely spread shareholder structure of the British partner, Dasa would win a blocking stake via its block-shareholder organisation. To prevent this, the voting share of the Germans will be reduced to no more than 20 percent in comparison to the capital share of 35 percent.

What amount of voting strength will Dasa boss Manfred Bischoff have in the future as designated co-chairman of the board next to BAe's Sir Richard Evans? This question, intensely discussed in Ottobrunn, is not unjustified. Because if the British electronics Goliath GEC is also to join the alliance as has been reported, Dasa splendour could quickly evolve into a rather diminishing role as junior partner.

Yet they had planned to grant themselves equal rights, the British, German and French friends. This is what especially the partners from the Seine are demanding with regards to the Airbus restructuring.

Dasa is holding 37,9 percent of shares of the European aircraft consortium, the British do have 20 percent. The merger would result in an Anglo-German share package of 57,9 percent. Unacceptable, is France's answer. It had to be at least 50 percent for Aérospatiale, else one would not be able to represent one's interests based on a sound franchise.

When all these questions are solved, the partners will look for a neutral country as a location for the new company. It would be a country where neither the flow of dividends or the tax status of the investors is put in question. Somewhere a brass plate is put on the door, and voilà, the new Pan-European EADC is finished.

But where do the revenues go, and what expenses the EADC pays to Germany, for example? In which currency are the accounts actually to be settled? Great Britain is not part of the single-currency reform. And what happens to the announced back-flow of funds to safeguard jobs, for instance the return of government granted Eurofighter program funds to the German economy? This used to be one of the key arguments of the German aerospace industry against the procurement of US F-16 fighters.

Interpretation of the, as it seems, largely unclarified state of affairs allows for a variety of standpoints. These range from understanding of both the quality of the things achieved and the difficulties still ahead, up to the heretical question "What is this going to give us?"

Well, this is finally leading to an effective European Union, at least that is what the common vision says.

The former co-ordinator of the government for German aerospace matters, Dr. Norbert Lammert, neatly captured the situation once more. In his speech on the occasion of receiving the Aerospace Trophy which was awarded to him by FLUG REVUE and its sister magazine aerokurier, he warned: "If the European, and especially the German aerospace industry has to cope with the next cyclic and therefore foreseeable downturn of the aerospace market in its antiquated structures, then God help us!"

From page 4 of FLUG REVUE 2/99