GEC's Thomson bid is an important test

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The Independent Online
Full marks to GEC for calling the French government's bluff and putting in a formal bid for Thomson CSF. GEC was told very firmly not to bother, for what France wants to do is both have its cake and eat it - flog off the government's remaining 58 per cent stake in Thomson but have the company absorbed into some French-owned industrial complex which remains at the beck and call of the state. All very Gallic.

Unfortunately for France, there is now such a thing as the European Union, and even if France doesn't much like that British invention, Le Single European Market, it must abide by its rules. These require that even in defence-related matters, all Europe is one, at least in so far as bidding battles are concerned.

GEC, the unwanted outsider, must therefore be allowed into the auction. And just in case the French planned to bury the bid without fair consideration, GEC's interest has now leaked. Whether this was by design or otherwise, the publicity certainly won't do GEC's cause any harm. The cause of European integration and fair play will meanwhile be given a powerful shot in the arm.

Since GEC is saying nothing about any of it, it is hard to tell precisely what its motives are here. It may well be that the bid is merely being used as a negotiating lever to extract the best of any alliances on offer with the French defence electronics industry. For the moment, however, we have to assume GEC's bid is for real and it really wants to buy Thomson. Certainly such a deal would make eminent sense and given the level of consolidation that is going on in the US, it is also probably vitally necessary.

Britain's two leading defence companies, GEC and British Aerospace, are very much at the forefront of moves to mirror in Europe what is happening in the US. To date they have been blocked by the intransigence of Europe's national governments, which on the whole still regard defence as a no- go area for integration. France, the leading offender, but others too, could hardly be more short- sighted in their approach. Without cross-border mergers, Europe's defence industry is going to flounder and die, outclassed and outbid in world markets by the emerging US behemoths. Domestic orders alone will not be enough to sustain these companies if they are to remain competitive.

GEC's bid for Thomson could prove an important test, not just of the robustness of European competition policy in the face of powerful national opposition, but also of the willingness of nations, when push comes to shove, to accept full industrial integration.