France bars arms link-up

THE CREATION of a European aerospace and defence giant capable of taking on the Americans is being frustrated by the state ownership of France's leading player, Aerospatiale.

The four partners in Airbus - British Aerospace, Daimler Benz, Aerospatiale and Casa of Spain - yesterday announced they had agreed to the formation of a unified company bringing together all their civil and military aerospace activities.

But in a report to the governments of the four countries they also said that "significant further work remains to be done to establish the feasibility" of such a merged company. They also failed to put a timetable on when the merger might take place.

"Frankly, it is now up to the French government," said one industry source. "If we are to move forward it has to clarify its position. This single company has to be run to make money and the best way to guarantee that is not to have any government involved as a shareholder."

Aerospatiale is 100 per cent owned by the French government. Earlier this week, Alan Richard, the French defence minister, said he did not believe its state ownership should be an obstacle to a European-wide restructuring.

The report from the four Airbus partners came in response to a joint statement from the British, French and German governments last December calling for a firm plan and timetable for restructuring by 31 March.

Observers suggested at the time that the the governments' deadline was unrealistic given the need to overcome the seemingly intractable ownership problem.

The industrial partners nevertheless said the report reflected "a wide measure of agreement in principle on the objectives, scope and operational structure" of the merged company. Other defence groups, notably Alenia, Saab, Dassault and Lagardere/Matra, would be invited to take part in the restructuring.

In a joint statement George Robertson, Defence Secretary, and Margaret Beckett, President of the Board of Trade, said they welcomed the wide measure of agreement that had been achieved but noted that further work was needed.

They added that urgent restructuring of Europe's defence industry was essential if it was to be globally competitive.